DGAP Vs Hotel Babylon INN (GSTAT)
The Goods and Services Tax Appellate Tribunal (GSTAT) has ruled that M/s Hotel Babylon Inn Pvt. Ltd. profiteered an amount of ₹31,28,631 by failing to pass on the benefit of a reduced Goods and Services Tax (GST) rate to its customers. The decision stems from a proceeding initiated under Section 171 of the Central Goods and Services Tax (CGST) Act, 2017, concerning the period between October 1, 2019, and June 30, 2020.
Background of the Case
The core of the dispute revolved around Notification No. 20/2019-Central Tax (Rate), dated September 30, 2019, which, effective from October 1, 2019, reduced the GST rates on hotel accommodation services. Specifically, for rooms priced between ₹1,001 and ₹7,500 per day, the GST rate was reduced, and for rooms priced above ₹7,501, it was also lowered. The Directorate General of Anti-Profiteering (DGAP) investigated Hotel Babylon Inn after an initial complaint was filed.
The DGAP’s investigation concluded that the hotel had not commensurately reduced its room tariffs following the GST rate reduction. Instead, the hotel allegedly increased the base prices of its rooms, thereby retaining the benefit of the lower GST rate.
Hotel’s Defense and DGAP’s Findings
M/s Hotel Babylon Inn Pvt. Ltd. argued that room rents in the hospitality industry are subject to market dynamics, including supply and demand, seasonal variations, and tourist seasons. They contended that their declared tariff had not been increased during the relevant period and that GST was charged separately on invoices, implying the benefit was passed on. The hotel also highlighted various room plans (European Plan, Continental Plan, Modified American Plan, American Plan) and occupancy types, suggesting price variations were a result of these factors and market forces.
