Principal Commissioner Vs Inox Leisure Ltd. (NAA)
1. The present Report dated 31.01.2020 has been furnished by the Applicant No. 2 i.e. the Director-General of Anti-Profiteering (DGAP) after a detailed investigation in line with Rule 129 (6) of the Central Goods & Service Tax (CGST) Rules, 2017. The brief facts of the present case are that an application dated 22.05.2019 was filed by the Applicant No. 1 against the Respondent alleging profiteering in respect of supply of ‘Services by way of admission to exhibition of cinematography films where the price of admission ticket was above one hundred rupees’ despite reduction in the rate of GST from 28% to 18% w.e.f. 01.01.2019. In the said application it was alleged by the Applicant No. 1 that the Respondent was selling the movie tickets of value of Rs. 250/-, Rs. 200/- and Rs. 150/- at the same prices after the reduction in the rate of GST from 28% to 18%, vide Notification No. 27/2018- Central Tax (Rate) dated 31.12.2018 and instead had increased the base prices resulting in non passing on of the benefit of rate reduction to his customers. Copy of the APAF-1 Form, letter dated 22.02.2019 and 22.03.2019 of the Respondent addressed to the Pr. Chief Controller of Accounts. CBIC New Delhi had also been enclosed by the Applicant No. 1 with his complaint.
2. The DGAP has stated in his Report that the Standing Committee on Anti-profiteering has examined the above application and on being prima facie satisfied, had referred it to the DGAP to conduct a detailed investigation. On receipt of the aforesaid reference from the Standing Committee on Anti-profiteering on 05.08.2019, a notice under Rule 129 (3) of the above Rules was issued by the DGAP on 14.08.2019 calling upon the Respondent to respond as to whether he admitted that he had not passed on the benefit of reduction in GST rate w.e.f. 01.01.2019 to his 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 to the notice as well as to furnish all documents in support of his reply. The Respondent was also allowed to inspect the non-confidential evidence/information which formed the basis of the said notice, during the period from 21.08.2019 to 23.08.2019, which was availed of by the Respondent on 26.08.2019. Further. vide e-mail dated 06.01.2020, the Applicant No. 1 was also afforded an opportunity to inspect the non-confidential documents furnished by the Respondent on 14.01.2020 or 15.01.2020 which was not availed of by the Applicant No. 1.
3. The DGAP has also reported that the period covered by the current investigation was from 01.01.2019 to 31.07.2019 and that the statutory time limit to complete the current investigation was on or before 04.02 2020 in terms of Rule 129 (6) of the CGST Rules, 2017.
4. The DGAP in his report has stated that in response to the notice dated 14.08.2019, the Respondent submitted his replies vide e-mails/letters dated 26.08.2019, 12.09.2019, 18.09.2019, 30.09.2019, 04 11 2019 and 22.01 2020 and inter-alia stated that:-
(a) The local enactments were regulating the rates/ticket prices that could be charged to the patrons in the units located in State of Telangana and hence. he had no say in the prices that could be charged. Therefore, vide letter dated 29.12.2018 (even prior to change in rate of tax w.e.f. 01.01.2019), he had made representation before the Licensing Authority, Commissioner of Police, Hyderabad and had requested guidance in respect of the change in prices.
(b) After the reduction in the rate of tax w.e.f. 01.01.2019, he had also made representations before the Principal Secretary (Home), Government of Telangana. Representations were also made by the Multiplex Association of India (MAI) which were followed by multiple meetings between the MAI and the local state authorities.
(c) Despite follow ups no further instructions were received and thus as a responsible corporate citizen he suo moto had given effect of the reduced GST rate on his ticket prices w.e.f. 07.01.2019 and voluntarily deposited an amount of Rs. 4,20,936/- against the profiteered amount of Rs. 4,20,731/-along with the interest of Rs. 10,065/- in the Consumer Welfare Funds (CWFs).
(d) He had three properties in the state of Telangana namely Hyderabad GSM Mall (having 8 Screens). Hyderabad GVK One (having 6 Screens) and Hyderabad MP (having 5 Screens). Further. Hyderabad GSM Mall theatre had started functioning in the month of June, 2019 and the first movie was exhibited on 29.06.2019 and the prices of tickets in Hyderabad GSM Mall theatre were fixed in terms of the order dated 14.06.2019 passed by Hon’ble High Court of Telangana in WP No. 11805 of 2019.
5. The Respondent, vide the afore-mentioned e-mails/letters has also furnished the following documents/information before the DGAP:-
a. Copies of GSTR-1 & 3B Returns for the period from December, 2018 to July, 2019.
b. Movie wise & ticket wise data for the period from December, 2018 to July. 2019.
c. Sample copies of tickets pre and post 01/01/2019.
d. Government Order No. 43 dated 15.10.2009 & G. 0. No. 169 dated 09.10.2012 approving the ticket prices.
e. Copies of representations made before the Principal Secretary (Home), Government of Telangana & Licensing Authority, Commissioner of Police, Hyderabad.
f. Copies of Cheque & Bank Statement for deposition of differential amount of Rs. 4,20,731/- along with interest of Rs. 10,065/- to PAO (HQ), CBIC in the Consumer Welfare Fund
g. Copy of order dated 14.06.2019 passed by Hon’ble High Court of Telangana in WP No. 11805 of 2019 along with copy of Writ petition,
6. The DGAP vide notice dated 14.08.2019 had also intimated the Respondent to provide a non-confidential summary of the information/documents furnished by him in terms of Rule 130 of the CGST Rules, 2017. However, the Respondent had not classified any of his information/documents as confidential in terms of Rule 130 of the Rules.
7. The DGAP has also reported that he has examined the reference from the Standing Committee on Anti-profiteering, the various replies of the Respondent and the documents/evidence on record. The main issues to be examined in the present matter were whether the GST rate on “Services by way of admission to the exhibition of cinematograph films where the price of admission ticket was above one hundred rupees” was reduced from 28% to 18% w.e.f. 01.01.2019 and if so, whether the benefit of such reduction in the rate of GST had been passed on by the Respondent to his recipients, in terms of Section 171 of the CGST Act, 2017.
8. On the above issues, the DGAP has further reported that the Central Government. on the recommendation of the GST Council, had indeed reduced the GST rate on “Services by way of admission to an exhibition of cinematograph films where the price of admission ticket was above one hundred rupees” from 28% to 18% w.e.f. 01.01.2019 vide Notification No. 27/2018- Central Tax (Rate) dated 31.12.2018
9. The DGAP has also stated that as per the provisions of Section 171 of the CGST Act. 2017 the legal requirement was very clear that in the event of a benefit of ITC or reduction in the rate of tax, there must be a commensurate reduction in prices of the goods or services. Such reduction could obviously be only such that the final price payable by a consumer got reduced commensurate with the reduction in the tax rate. This was the legally prescribed mechanism for passing on the benefit of ITC or reduction in rate of tax to the recipients under the GST regime and there was no other method available to pass on such benefits. From 01.01.2019, the Respondent. in terms of Section 171 of the CGST Act, 2017, was bound to maintain the base prices of the tickets across all classes of seats/slots and GST should have been charged on the pre rate reduction base prices.
10. The DGAP has further stated that the Respondent was dealing in two classes of admission/movie tickets i.e. ‘Executive’ and ‘Royal’. For the purpose of determination of profiteering, the class wise number of tickets sold during the period from 01.12.2018 to 31.12.2018 (pre-GST rate reduction) were taken and an average base price (after discount) was obtained by dividing the total taxable value by total number of tickets sold during this period. The average base prices of the ticket were compared with the actual selling price of the tickets sold during post-GST rate reduction i.e. on or after 01.01.2019. The DGAP has furnished the illustration of the methodology adopted while computing profiteering, in the Table-A’ below:-
Table-‘A’
(Amount in Rupees)
