Principal Commissioner Vs Srinivasa Cine Enterprises (Competition Commission of India)
Introduction: The Competition Commission of India (CCI) recently ruled on a case involving Srinivasa Cine Enterprises, finding them guilty of not passing on the benefits of a reduction in the Goods and Services Tax (GST) rate. This article delves into the details of the case, exploring the investigation, the arguments presented, and the CCI’s conclusions.
Detailed Analysis: The investigation, initiated under Rule 129(6) of the Central Goods & Service Tax (CGST) Rules, 2017, stemmed from an application alleging profiteering in the supply of “Services by way of admission to exhibition of cinematography films.” The applicant claimed that Srinivasa Cine Enterprises did not pass on the benefit of the GST rate reduction from 18% to 12% starting January 1, 2019.
The Standing Committee on Anti-profiteering forwarded the application to the Director-General of Anti-Profiteering (DGAP) for a detailed investigation. The DGAP issued notices, collected evidence, and examined the Respondent’s submissions.
The Respondent argued that they had not increased prices due to GST, claiming to have passed on the benefits to customers. However, the DGAP’s analysis revealed an increase in base ticket prices despite the GST rate reduction.
The DGAP calculated the profiteered amount to be Rs. 14,62,604 during the period from January 1, 2019, to July 31, 2019. The Respondent was found to have violated Section 171 of the CGST Act, 2017, which mandates passing on the benefit of tax reductions to consumers.
Conclusion: The CCI, after considering the DGAP’s report, concluded that Srinivasa Cine Enterprises had indeed profiteered by not reducing ticket prices in line with the GST rate reduction. The Respondent was directed to deposit the profiteered amount of Rs. 14,62,604, along with interest, in the Central and Telangana State Consumer Welfare Funds.
This case serves as a reminder of the importance of complying with anti-profiteering provisions and ensuring that consumers benefit from tax rate reductions.
FULL TEXT OF THE ORDER OF COMPETITION COMMISSION OF INDIA
The present Report dated 10.12.2019 has been received from the Director-General of Anti-Profiteering (DGAP) after a detailed investigation under Rule 129 (6) of the Central Goods & Service Tax (CGST) Rules, 2017.
2. The brief facts of the case and findings of investigation conducted by the DGAP are as under:-
i. A reference was received from the Standing Committee on Anti-profiteering on 28.06.2019, to conduct a detailed investigation in respect of an application dated 06.03.2019, filed by the Applicant No. 1, under Rule 128 of the CGST Rules, 2017, alleging profiteering by the Respondent in respect of supply of “Services by way of admission to exhibition of cinematography films”. The Applicant No. 1 had alleged that the Respondent did not pass on the benefit of reduction in the GST rate on the movie admission tickets, from 18% to 12% w.e.f. 01.01.2019, vide Notification No. 27/2018-Central tax (Rate) dated 31.12.2018 and instead, increased the base prices to maintain the same cum-tax selling prices.
ii. The above application was examined by the Standing Committee on Anti-profiteering, in its meeting held on 15.05.2019, the minutes of which were received by the DGAP on 28.06.2019, whereby it was decided to forward the same to the DGAP to conduct a detailed investigation in the matter. Accordingly, it was decided to initiate an investigation and collect evidence necessary to determine whether the benefit of reduction in rate of tax had been passed on by the Respondent to the recipients in respect of supply of “Services by way of admission to exhibition of cinematography films” supplied by the Respondent.
iii. The Standing Committee had forwarded the following submission/documents of the Applicant No. 1:-
a) Anti-profiteering Application form (APAF-1).
b) Letter dated 03.04.2019 of the Applicant No. 1 to the Standing
Committee on Anti-profiteering.
iv. The DGAP issued a Notice on 08.07.2019 under Rule 129 of the CGST Rules, 2017 to the Respondent after the receipt of the reference from the Standing Committee on Anti-profiteering, calling upon the Respondent to reply as to whether he admitted that the benefit of reduction in 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. Vide the said Notice, the Respondent was also given an opportunity to inspect the non-confidential evidences/information furnished by the Applicant No. 1 during the period 15.07.2019 to 17.07.2019, which the Respondent did not avail.
Vide e-mail dated 25.11.2019, the Applicant No. 1 was afforded an opportunity to inspect the non-confidential documents/reply furnished by the Respondent on 28.11.2019 & 29.11.2019, which the Applicant No. 1 did not avail of.
v. The period covered by the current investigation was from 01.01.2019 to 31.07.2019.
vi. In response to the DGAP’s Notice dated 08.07.2019, the Respondent has submitted his replies vide letters and e-mails dated 18.07.2019, 08.08.2019, 07.10.2019 and 26.10.2019. The replies of the Respondent have been summed up as follows:-
a) Prior to introduction of GST, he had charged the audience Rs. 90/- (for balcony class) which was inclusive of Entertainment Tax. That meant the base prices was Rs. 78.26 /- and the Entertainment Tax was Rs. 11.71/-. In the GST regime the applicable tax rate was 18%. It meant the price to be charged to audience should be Rs. 92.34/- which was inclusive of GST (base price 78.26+ GST 14.08). While he had charged Rs. 90/- to the audience which was inclusive of GST. He had not charged any extra amount because of GST. The Respondent was also claiming to have passed on the benefit to the customers by charging the same amount of Rs. 90/-which included GST (base price 76.27+GST 13.73), thereby reducing the base price by Rs. 1.99 (Rs. 78.26-Rs. 76.27) at the time of implementation of GST w.e.f. 01.07.2017. The price of the movie admission tickets pre & post 01.01.2019 was as follows:-
Table-A
