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TMI Blog2020 (9) TMI 497X X X X Extracts X X X X X X X X Extracts X X X X ..... cation 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-I 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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-I & 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. O. 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/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction 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) Sl. No. Description Factors Pre Rate Reduction (01.12.2018 to 31.12.2018) Post Rate Reduction (From 01.01.2019) Pre Rate Reduction (01.12.2018 to 31.12.2018) Post Rate Reduction (From 01.01.2019) 1. Multiplex Name A Hyderabad MP Hyderabad GVK One 2. Ticket Category B Executive (2D) Royal (3D) 3. Ticket MRP C 150/- 150/- 280/- 280/- 4. Total No. of tick ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal No. of tickets sold C 56,230 12,785 4,59,297 33,272 1,167 71,218 4. Total taxable value (after Discount, if any) D 65,89,031 16,25,229 5,37,10,191 51,98,417 1,97,783 1,11,05,324 5. Average base price (without GST) E=D/C 117.18/- 127.12/- 116.94/- 156.24/- 169.48/- 155.93/- 6. GST Rate F 28% 18% 18% 28% 18% 18% 7. Actual Selling price (post rate reduction) (including GST) G=E* (1+F) 150/- 150/- 138/- 200/- 200/- 184/- 8. Commensurate Selling price (post Rate reduction) (including GST) H=118 % of E 138.27/- 138.27/- 184.36/- 184.36/- 9. Excess amount charged or Profiteering per Ticket I=G-H 11.73/- - 15.64/- - 10. Total J=C*I 1,49,968 - 18,252 - 11. Total Profiteering (Hyderabad MP)(K) Rs. 1,68,220/- Hyderabad GVK One (Table-'C) (Amount in Rupees) Sl. No. Description Factors Pre Rate Reduction 01.12.2018 to 31.12.2018 Post Rate Reduction 01.01.2019 to 06.01.2019 Post Rate Reduction 07.01.2019 to 31.07.2019 Pre Rate Reduction 01.12.2018 to 31.12.2018 Post Rate Reduction 01.01.2019 to 06.01.2019 Post Rate Reduction 07.01.2019 to 31.07.2019 1. Class of Tickets A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintain the same selling prices (or MRPs), resulting in extra charging from the customers for the tickets, which they were paying prior to reduction in the rate of tax from 28% to 18% w.e.f. 01.01.2019 and hence he has denied the benefit of reduction in the rate of tax to his recipients. However, w.e.f. 07.01.2019, the selling prices had been revised commensurately to pass on the benefit of reduction in the rate of tax from 28% to 18% by the Respondent. 13. The DGAP has also contended that the allegation of profiteering by way of increasing the base prices of the tickets (Services) by way of not reducing the selling prices of the tickets (Services) commensurately, despite the reduction in GST rate on "Services by way of admission to exhibition of cinematography films where price of admission ticket is above one hundred" from 28% to 18% w.e.f. 01.01.2019, appeared to be correct. From the Table- B, C & D above, it was quite clear that the base prices of the admission tickets had been indeed increased, as a result of which the benefit of reduction in GST rate from 28% to 18% (w.e.f. 01.01.2019), was not passed on to the recipients by way of commensurate reduction in prices charged. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o say in the prices that could be charged d. That to address/clarify on the issue of profiteering, he had made a representation before the Principal Secretary (Home), Govt. of Telengana and enclosed a copy of the same. e. That on reduction of the rate of tax, he had reduced the ticket prices suo moto and had voluntarily deposited the profiteered amount of Rs. 4,20,731/- along with interest of Rs. 10,065/- for the period from 01.01.2019 to 08.01.2019 in the Consumer Welfare Funds (CWFs). f. That in view of above, he should not be held in contravention of the provisions of Section 171 of the CGST Act, 2017. 16. We have carefully considered the Report furnished by the DGAP, the submissions made by the Respondent and the other material placed on record. On examining the various submissions we find that the following issues need to be addressed:- a. Whether the Respondent has passed on the commensurate benefit of reduction in the rate of tax to his customers? b. Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017 committed by the Respondent? 17. It is observed from the record that the Respondent is engaged in the business of running of cine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the benefit to each of his buyers or not. Therefore, it would not have been correct to compare the average base prices pre and post rate reductions. Hence, the mathematical methodology applied by the DGAP to compute the profiteered amount is justified, reasonable, appropriate and in consonance with the provisions of Section 171 which can be relied upon. 19. It is also revealed from the perusal of Table-'B' to 'D' supra that after comparing the average selling prices pre rate reduction for the period from 01.12.2018 to 31.12.2018 and the actual selling prices post rate reduction w.e.f. 01.01.2019 to 31.07.2019, as per the details submitted by the Respondent, it has been found that the Respondent has profiteered an amount of Rs. 4,20,731/- w.e.f. 01.01.2019 to 06.01.2019, thus the benefit of reduction in the GST rate has not been passed on to the recipients by way of commensurate reduction in the prices by the Respondent, in terms of Section 171 (1) of the CGST Act, 2017 during the above period. However, it has been confirmed by the DGAP that the Respondent has reduced his prices commensurately w.e.f. 07.01.2019 and has also deposited an amount of Rs. 4,20,731/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lier cannot claim that he has passed on more benefit to one customer on a particular product therefore he would pass less or no benefit to another customer than what is actually due to that customer, on another product. Each customer is entitled to receive the benefit of tax reduction or ITC on each SKU or unit or service purchased by him subject to his eligibility. The term "commensurate" mentioned in the above Sub-Section provides the extent of benefit to be passed on by way of reduction in the price which has to be computed in respect of each SKU or unit or service based on the price and the rate of tax reduction or the additional ITC which has become available to a registered person. The legislature has deliberately not used the word 'equal' or 'equivalent' in this Section and used the word 'Commensurate' as it had no intention that it should be used to denote proportionality and adequacy. The benefit of additional ITC would depend on the comparison of the ITC/CENVAT which was available to a builder in the pre-GST period with the ITC available to him in the post GST period w.e.f. 01.07.2017. Similarly, the benefit of tax reduction would depend upon the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was only required to reduce selling prices of the tickets by taking in to account the reduction in the tax rate w.e.f. 01.01.2019 which he has failed to do till 06.01.2019. Therefore, the above contention of the Respondent is frivolous and hence it cannot be accepted. 21. The Respondent has also claimed that the prices of the tickets were fixed in terms of the orders attached as Annexure-3, by the State Government and hence he could have reduced them. In this connection it would be relevant to mention that the Telengana State Regulations or any order issued by the State Government in the Home Department cannot supersede the provisions of the CGST/Telengana SGST Act, 2017 which govern the fixation of GST rates as well as the anti-profiteering measures. Since, the Central Government and the Government of Telengana have given the benefit of tax reduction out of their precious tax revenue to benefit the common cinema goers the Respondent cannot deny the same since it is not to be paid by him from his own pocket. The Respondent cannot illegally enrich himself at the expense of the general public which is vulnerable, unorganised and voiceless and misappropriate the above benefit. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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