Santosh Vs Miraj Entertainment Limited (NAA)
The rates of GST on Services by way of admission to exhibition of cinematograph films where the price of admission ticket was above one hundred rupee was reduced from 28% to 18% and Services by way of admission to exhibition of cinematograph films where the price of admission ticket was one hundred rupees or less was reduced from 18% to 12% w.e.f. 01.01.2019, vide Notification No. 27/2018- Central Tax (Rate) dated 31.12.2018. The benefit of reduction in GST rates was required to be passed on to the recipients by the Respondent as per the provisions of Section 171 of the above Act.
From the facts, it emerges that there is no dispute relating to the fact that the Respondent has increased the base prices of the admission tickets in respect of the regular category and continues to charge the cine-goers at the prevailing rates despite a reduction in the GST w.e.f. 1.1.2019 vide Notification No. 27/2018- Central Tax (Rate) dated 31.12.2018. The Respondent in the written submissions as well as during the personal hearing has admitted the above-said liability of excess collection during the period 1.1.2019 to 30.4.2020.
Authority finds that the Respondent has been profiteering by way of increasing the base prices of the tickets (Services) by not reducing the selling price of the tickets (Services) commensurately in the regular category, despite the rate reduction in GST rate on “Services by way of admission to exhibition of cinematograph fi/ms”where the price of admission ticket was one hundred rupees or above, from 28% to 18% w.e.f. 01.01.2019. From the Table ‘B’ above, it is evident that the base prices of the admission tickets were indeed increased, as a result of which the benefit of reduction in GST rate from 28% to 18% and 18% to 12% (w.e.f. 01.01.2019), was not passed on to the recipients by way of commensurate reduction in prices charged (including lower GST @ 18%). The total amount of profiteering covering the period of 01.01.2019 to 30.04.2020 for the ‘Regular Category’ was 12,83,999/-.
This Authority based on the facts discussed above has found that the Respondent has clearly resorted to profiteering in respect of ‘Regular Category’ by way of either increasing the base prices of the service while maintaining the same selling prices or by way of not reducing the selling prices of the service commensurately, despite a reduction in GST rate on “Services by way of admission to an exhibition of cinematograph films where the price of admission ticket is above one hundred rupees” from 28% to 18%” w.e.f. 01.01.2019 to 30.04.2020. On this account, the Respondent has realized an additional amount to the tune of Rs. 12,83,999/-from the recipients of ‘Regular Category’ which included both the profiteered amount and GST on the said profiteered amount. Thus the profiteering amount is determined as Rs. 12,83,999/-as per the provisions of Rule 133 (1) of the CGST Rules, 2017 in respect of ‘Regular Category’ only.
Given the facts mentioned above and for the reasons discussed hereinabove, the Respondent is therefore directed to reduce the prices of his tickets of regular category as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, keeping in view the reduction in the rate of tax so that the benefit is passed on to the recipients. The Respondent is also directed to deposit the profiteered amount of 12,83,999/- along with the interest to be calculated @ 18% from the date when the above amount was collected by him from the recipients till the above amount is deposited. The Respondent is further directed to refund an amount of Rs. 11.73/- each to Applicant Nos. 1 & 2 along with interest to be calculated @ 18% from the date of when the said amount was collected by him from the above Applicants till the above amount is paid. Since the rest of the recipients, in this case, are not identifiable, the Respondent is directed to deposit the amount of profiteering of Rs. 6,41,988/- in the Central Consumer Welfare Fund (CWF) and Rs. 6,41,988/- in the Telangana State CWF as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017, along with 18% interest. The above amount shall be deposited within a period of 3 months from the date of receipt of this Order failing which the same shall be recovered by the Commissioner CGST/SGST as per the provisions of the CGST/Telangana GST Act, 2017.
FULL TEXT OF ORDER OF NATIONAL ANTI-PROFITEERING AUTHORITY
The present Report dated 21.12.2020 has been received from the Director General of Anti-Profiteering (DGAP), who has conducted a detailed investigation in respect of two applications filed by Applicant No.1 and Applicant No.2 under Rule 128 of the CGST Rules, 2017, alleging profiteering by the Respondent to supply of “Services by way of admission to exhibition of cinematography films”.
2. The DGAP in his report dated 31.12.2020 has inter alia, stated that:-
(i) Applicant No. 1 & 2 had alleged that the Respondent did not pass on the benefit of reduction in the GST rate on “Services by way of admission to exhibition of cinematograph films”, which was reduced w.e.f. 1.1.2019, 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 CGST Act, 2017, and instead, increased the base prices to maintain the same cum-tax selling prices of the admission tickets.
(ii) The aforesaid applications were examined by the Standing Committee on Anti-profiteering, in its meeting, the Minutes of which were received by the DGAP on 06.05.2020, whereby it was decided to forward the same to the DGAP to conduct a detailed investigation in the matter. The Standing Committee forwarded the following submission/documents of the Applicant Nos. 1 & 2:-
a. Online complaints NAACMP34678 & NAACMP3716 filed by the Applicant No. 1 & 2 respectively.
b. Letter dated 30.09.2019 of the Respondent to the Superintendent (Anti-Evasion) regarding his working of ticket prices with GST rates from 1.1.2019 to 3.2.2019.
(iii) After the receipt of the reference from the Standing Committee on Anti-profiteering, a Notice of Investigation (NOI) dated 03.06.2020 under Rule 129 of the Rules was issued by the DGAP calling upon the Respondent to reply as to whether he admitted that the benefit of reduction in the rate of tax 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 to the Notice as well as furnish all supporting documents. The Respondent was also allowed to inspect the non-confidential evidence/information furnished by Applicant No. 1 & 2 during the period 19.06.2020 to 22.06.2020, which the Respondent did not avail.
(iv) The period covered by the current investigation was from 1.1.2019 to 30.4.2020.
(v) In response to the Notice dated 3.6.2020, the Respondent submitted his reply vide letters and e-mails dated 1.10.2020, 2.10.2020, 31.10.2020, 19.11.2020, 3.12.2020, 16.12.2020, 30.12.2020, and 31.12.2020.
(vi) All the data submitted by the Respondent was confidential. As such there were no details to be shared with Applicant No. 1 & 2, and they could not be provided an opportunity to verify non-confidential information submitted by the Respondent.
(vii) The reply of the Respondent received by the DGAP has been, inter–alia, summed up below:
a. That the prices of the cinema tickets were decided by the Government of Telangana from time to time. The prices fixed only had to be collected by the cinema screen owner and no other separate charges were allowed or permitted. Further, all the taxes calculated on the price were as per the proportion of taxes from time to time and had to be paid. The tax was worked out as prescribed under the relevant Act. In the case of GST, the tax was calculated in the proportion of 18/118 or 28/128, as the case might be prescribed under Rule 35 of the CGST Rules, 2017. The price fixed by the Government was a “fixed amount” and did not have any break up of basic price, GST, Total, etc. i.e. no GST was collected from the customer. The Respondent had also submitted the copy of the license dated 31.05.2017 granted to him by the licensing authority, whereby prices for the shows were fixed. Thus, the price was fixed by the Government of Telangana only and had to be charged irrespective of the tax rates from time to time and the increased liability was to be borne by the cinema screens only.
b. That he had collected prices fixed as per the license per Order No. GO. Ms. No. 54, Home (Gen. A) Department, dated 26.04.2017, wherein the Government of Telangana accorded permission for the rate of admission to Recliner and Regular Seats, details of which have been mentioned below:-
