Shri Himanshu Sharma Vs NY Cinemas LLP (National Anti-Profiteering Authority)
1. The present Report dated 12.09.2019 has been furnished by the Applicant No. 2 i.e. the Director General of Anti-Profiteering (DGAP), under Rule 129 (6) of the Central Goods & Services Tax (CGST) Rules, 2017. The brief facts of the case are that the Applicant No. 1 had filed an application in which it was alleged that the Respondent had not passed on the benefit of reduction in the GST rates on “Services by way of admission to exhibition of cinematograph films where price of admission ticket was above one hundred rupees” from 28% to 18% and “Services by way of admission to exhibition of cinematograph films where price of admission ticket was one hundred rupees or less” from 18% to 12% w.e.f. 01.01.2019, vide Notification No. 27/2018- Central Tax (Rate) dated 31.12.2018, by way of commensurate reduction in prices, in terms of Section 171 of the Central Goods and Services Tax Act, 2017 and instead, had increased the base prices to maintain the same cum-tax selling prices of the admission tickets. Along with the application, the Applicant No. 1 had submitted copies of invoices with 28% and 18% GST charged, his own working of GST computation and GSTIN details of the Respondent.
2. The above Applicant had also submitted the following documents along with his application:-
(a) APAF Form
(b) Driving Licence
(c) Copy of invoice wherein 28% GST had been charged
(d) Copy of invoice wherein 18% GST had been charged
(e) Detailed Working of GST collected and paid
(f) GSTN details of NY Cinemas
3. The DGAP has stated in his Report dated 12.09.2019 that the Standing Committee on Anti-profiteering had examined the above application in its meeting held on 11.03.2019, the minutes of which were received by the DGAP on 27.03.2019, whereby it was decided to refer the matter to the DGAP for initiating investigation and collect evidence necessary to determine whether the benefit of reduction in the rates of GST on supply of “Services by way of admission to exhibition of cinematograph films” had been passed on by the Respondent to the recipients or not.
4. The DGAP has also stated that a Notice under Rule 129 (3) of the above Rules was issued by him, calling upon the Respondent to reply as to whether he admitted that the benefit of reduction in the GST rates w.e.f. 01.01.2019 had not been passed on to the recipients by way of commensurate reduction in prices and if so, to suo moto determine the quantum thereof and indicate the same in his reply. The Respondent was afforded an opportunity to inspect the non-confidential evidence/information which formed the basis of the above Notice, during the period from 16.04.2019 to 18.04.2019. However, the Respondent did not avail of the opportunity. The period covered by the current investigation is from 01.01.2019 to 31.03.2019.
5. The DGAP has further stated that as the Applicant No. 1 had made a complaint which was specific to the Theatre/Screen being operated by the Respondent in the District of Hapur in the State of Uttar Pradesh, Notice for Initiation of investigation was issued for the same only. The Respondent had also provided the detailed outwards supplies and pricing data for the theatre in Hapur only. Hence, the scope of this investigation was limited to the Theatre located in Hapur.
6. The time limit to complete the investigation was extended upto 26.09.2019 by this Authority in terms of Rule 129 (6) of the above Rules, vide order dated 19.06.2019.
7. The Respondent has submitted his replies to the notice, vide e-mails/letters dated 06.05.2019, 17.05.2019, 21.05.2019 20.05.2019, 23.05.2019, 28.08.2019, and 30.08.2019. The submissions of the Respondent are summed up as follows:-
a. That the Respondent was engaged in the business of running a chain of multiplexes in India and currently had screens operational in Kotkapura of Punjab State, Greater Noida, Hapur, Ghazipur, Raebareli, Pilkhua and Kanpur Districts of Uttar Pradesh and Surendra Nagar and Bhuj Districts of Gujarat.
b. That the Respondent had legitimately reduced the rates of tax for movie tickets but was not able to incorporate changes in the tax rates for the movie tickets of value more than Rs. 100/- from 28% to 18% and for movie tickets of value less than or upto Rs. 100 from 18% to 12% for the initial period of 2 days i.e. 01.01.2019 to 02.01.2019.
c. That the excess tax collected for the period from 01.01.2019 and 02.01.2019 for the cinema located in Hapur amounted to Rs. 3,309/- and a summary of the price list along with tax collected and paid by the Respondent pre and post 01.01.2019 was submitted by him.
d. That the Respondent had not breached the provisions of Section 171 of CGST Act, 2017 citing the following reasons:-
i. That the benefit was passed on to the consumers only in the cases where reduction in the rates of tax had not reduced the cum-tax prices of the admission tickets.
ii. That the base prices of the admission tickets had remained unchanged for the period from 01.01.2019 to 02.01.2019.
iii. That the rates of tax had also remained unchanged for the period from 01.01.2019 and 02.01.2019.
e. That the Notice was received only for the cinema located in District of Hapur, however, the amount of excess tax collected for the whole state of Uttar Pradesh including district of Hapur was Rs. 18,116/- which had been voluntarily paid.
f. That it was not a case of profiteering, rather it was a case of excess tax collected which had been voluntarily paid by him.
8. Vide his aforesaid e-mails/letters, the Respondent had also submitted the following documents/information:-
a. Copies of GSTR-1 Returns for the period from December, 2018 to March, 2019.
b. Copies of GSTR-3B Returns for the period from December, 2018 to March, 2019.
c. Copies of sample invoices pre and post 01.01.2019.
d. A brief summary of total revenue from all the screens located in the state of Uttar Pradesh and its reconciliation with the GSTR-1 Returns for the month of January, 2019.
e. A summary of the price list along with taxes collected and paid by the Respondent for the month of January, 2019 in the state of Uttar Pradesh.
f. Monthly Summary of tickets for the period from December, 2018 to March, 2019.
9. The DGAP has also submitted that the Central Government, on the recommendation of the GST Council, had reduced the GST rate on “Services by way of admission to exhibition of cinematograph films where price of admission ticket was above one hundred rupees” from 28% to 18% and “Services by way of admission to exhibition of cinematograph films where price of admission ticket was one hundred rupees or less” from 18% to 12% w.e.f. 01.01.2019, vide Notification No. 27/2018- Central Tax (Rate) dated 31.12.2018. He has further submitted that the legal requirement of Section 171 of the CGST Act, 2017 was abundantly clear that in the event of benefit of input tax credit or reduction in the rate of tax, there must be a commensurate reduction in the prices of the goods or services. Such reduction could obviously be in money terms only, so that the final price payable by a consumer got reduced. He has also contended that this was the legally prescribed mechanism for passing on the benefit of input tax credit or reduction in the rate of tax to the recipients under the GST regime. He has further contended that Section 171 simply did not provide a supplier of goods or services any other means of passing on the benefit of input tax credit or reduction in the rate of tax to the consumers.
10. The DGAP has also intimated that the Respondent in respect of a few category of seats had continued to charge the erstwhile higher rates of GST which was a case of wrong charging of the rates of GST and was not under the purview of this investigation. The DGAP has further intimated that the Respondent’s claim that he had not breached the provisions of Section 171 of the Act was not maintainable due to the following reasons:-
a. The reduction in the prices of the tickets should have been commensurate with the reduction in the rates of tax. Mere reduction in the cum tax prices of admission tickets could not be treated as compliance of the provisions of Section 171 of the Act, if the reduction was not commensurate with the reduction in the rates of Tax.
b. To comply with the provisions of Section 171 of the Act, the Respondent had to maintain the base prices of the tickets across all classes of seats, across all time slots during the period post 01.01.2019, as they were earlier, and the applicable reduced rates of GST should have been charged on such base prices w.e.f. 01.01.2019.
11. The DGAP has further intimated that from the analysis of the details of outward supplies of admission tickets submitted by the Respondent for the month of December, 2018 i.e. prior to the rate reduction, it was observed that there were basically three classes of tickets in the theatre, namely, Gold, Platinum and Premium. He has also stated that the pricing of tickets for a movie varied within each category depending on the timing of the show as well as part of the week during which the movie was being screened i.e. weekdays or weekends. He has further stated that analysis of the cum-tax prices in each category for the period from 01.12.2018 to 31.12.2018 showed that the pricing pattern of the movie tickets during the period of pre-rate reduction was as follows:-
Table A
(Price in Rs.)
