TMI Blog2020 (12) TMI 1202X X X X Extracts X X X X X X X X Extracts X X X X ..... the benefit of which was required to be passed on to the recipients by the Respondent as per the provisions of Section 171 of the above Act. The Respondent has resorted to profiteering 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 exhibition of cinematograph films where price of admission ticket is one hundred rupees or less from 18% to 12% w.e.f. 01.01.2019 to 30.06.2019. On this account, the Respondent has realized an additional amount to the tune of ₹ 2,23,850/- from the recipients which included both the profiteered amount and GST on the said profiteered amount. Thus the profiteering is determined as ₹ 2,23,850/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017. The Respondent is therefore directed to reduce the prices of his tickets 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 profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... line with Rule 129 (6) of the Central Goods Service Tax (CGST) Rules, 2017. The brief facts of the present case are that Applicant No. 1 had filed an application dated 06.03.2019 under Rule 128 of the CGST Rules, 2017 alleging profiteering by the Respondent in respect of the supply of Services by way of admission to exhibition of cinematograph films where price of admission ticket is one hundred rupees or less when GST was reduced from 18% to 12% w.e.f. 01.01.2019 vide Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018. 2. Vide his Report, the DGAP has reported that Applicant No. 1 had alleged that the Respondent had not passed on the benefit of reduction in the GST rate on the aforesaid 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. Applicant No. 1 had also alleged in his letter dated 03.04.2019 that the Respondent was selling tickets of different categories priced at ₹ 100/- or less than 100/- (excluding Tax). However, the DGAP, on examination of the record of the monthly sale of tickets in eac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide letters and e-mails dated 18.07.2019, 23.10.2019, 07.11.2019, 26.11.2019, 05.12.2019, and 13.12.2019 and inter-alia stated that:- (i) He had to seek approval from the Licensing Authority, for the change in the basic prices of tickets. He was governed by the State Government's Cinematography Act and the Commissioner of Police, Hyderabad, was his licensing Authority and any change in prices of tickets could only be done after his approval. (ii) State Government's GO (Government Order) directed the Respondent to sell tickets at allowed prices, inclusive of taxes. Therefore, he had continued to sell the tickets, for the lower classes at ₹ 80/- and ₹ 50/-, whereas for the upper classes, he had reduced ticket prices because of the different GST tax rates in existence. (18% and 28%) (iii) He had faced losses as a result of the introduction of GST w.e.f. July 2017. Before the introduction of GST on 1st July 2017, his ticket rate was ₹ 120/- inclusive of entertainment tax. He was unable to arrive at ₹ 120/- inclusive of GST as the price of his movie ticket since the bandwidth of pricing at any price between ₹ 118/- (100+18%) and ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. The DGAP also stated that the respondent vide email dated 13.12.2019 claimed that It is utmost important that tax matters have to be crystal clear, without any ambiguity and that is possible only when such issues are discussed amongst various concerned respectable Government Offices. Keeping in this mind, he feels, his communication with the Government of India, regarding Tax matters, may be shared for such purpose i.e. his communication may be treated as semi-confidential . 8. The DGAP further reported that the reference received from the Standing Committee on Anti-profiteering, the various replies of the Respondent, and the documents/evidence on record had been examined in detail and the main issue was whether the rate of GST on Services by way of admission to exhibition of cinematography films where price of admission ticket is above one hundred rupees was reduced from 28% to 18% w.e.f. 01.01.2019 and Services by way of admission exhibition of cinematograph films where price of admission ticket is one hundred rupees or less was reduced from 18% to 12% w.e.f. 01.01.2019 and if so, whether the benefit of such reduction in the rates of GST was passed on by the Respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se categories of tickets were not a part of the complaint made by Applicant No.1 nor the same were reflected in the sale of December 2018, the Respondent was asked to clarify the same and to submit the details of taxable supplies for the months of September, October, and November 2018. In response, the Respondent vide letter dated 05.12.2019 submitted the sale details for the months of September 2019 to November 2019. A perusal of the sale details showed that from the month of September 2017 to November 2017 the base prices of the tickets were ₹ 100/-, ₹ 67.80 ₹ 42.37 only. However, no clarification concerning the variation in prices during the month of March 2019 and May 2019 was submitted. The Respondent was once again sent a letter/email on 13.12.2019, requesting him to submit the reasons for the movie ticket prices in the month of March 2019 May 2019. The Respondent vide email dated 13.12.2019 submitted that the ticket rate changes in March and May, in his case, should not attract any anti-profiteering penalties, as he had not profiteered. As the comparable data/rates of new categories during the months of March 2019 or May 2019 were not available during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01.12.2018 to 31.12.2018 01.01.2019 to 30.06.2018 Amount charged i.e. inclusive of tax (in Rs.) GST Rate (%) Price of Ticket i.e. Base Price (in Rs.) Amount charged i.e. inclusive of tax (in Rs.) GST Rate (%) Price of Ticket i.e. Base Price (in Rs.) Commensurate Base Price (in Rs.) Amount which was to be Charged (in Rs.) A B C D E=[C/118%] F G H I J=(I*112%) 1 Upper and Lower Balcony 118 18 100.00 112 12% 100.00 100.00 112.00 2 First Class 80 18 67.80 80 12% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice charged (Rs.) Commensurate Base Price (Rs.) The excess amount charged per ticket (rs.) Excess tax charged per ticket @ 12% Profiteering per unit (Rs.) Qty. Sold Total Profiteering (including tax @12%) (in Rs.) A B C D E=(C-D) F=(E*12%) G=(E+F) H I=(H*G) 1. First Class 71.43 67.80 3.63 0.44 4.07 23333 94,965 2. Second Class 44.64 42.37 2.27 0.27 2.54 50742 1,28,885 3. Upper and Lower Balcony 100.00 100.00 0 0 0 156874 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t prices for weekends and holidays e. That the movie ticket prices depended on the price at which he had procured the rights to exhibit the movie from its producer/distributor and the price of the movie was decided by him based on the demand for the movie. f. That the difference amount i.e. the amount that he was charged with having profiteered had been paid to the producer/distributor and hence, his margins remained the same. g. That he had submitted the invoices raised by the producers/distributors of the movies. h. That the computations done by the DGAP to arrive at the profiteered amount were wrong and unsustainable. During a tax rate change, the period for which he could not raise the prices of his products/outward supplies was not prescribed. i. That he was penalized under the pretext of profiteering, for increasing the ticket prices even after a few months had passed. j. That he could not be expected to not increase the movie ticket prices even when a new movie came. k. That since there was no basis to penalize him with anti-profiteering proceedings, he had requested to direct the Applicants to either re-compute the amount of profiteering o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have carefully heard the Respondent and perused the submissions of the Applicants and the Respondent as also the case record placed before us and it has been revealed that the Central and the State Governments had reduced 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 rupees 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 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 which was required to be passed on to the recipients by the Respondent as per the provisions of Section 171 of the above Act. 22. On examining the various submissions placed on record, we need to find whether there was any reduction in the GST rate and whether the benefit of reduction in the rate of tax was passed on or not to the recipients as provided under Section 171 of the CGST Act, 2017. 23. Section 171 of the CGST Act provides as under:- (1). Any reduction in rate of tax on any supply of goods or services or the benefit of ITC s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with a range of ticket prices within which he kept changing the prices of the tickets based on various factors like new/old movies, age performance of the movies. The above contention of the Respondent is not correct. In this connection, it was observed that as per the data made available by the Respondent to the DGAP during the investigation, he had not categorized/rated the movie ticket prices as per the above-mentioned factors, and the DGAP after scrutinizing the above data, found that the prices of the admission tickets remained more or less uniform post-tax rate reduction and were not dynamically changing. Further, the Respondent has not submitted any documentary evidence to sustain his claim. Therefore, in the absence of any documentary evidence, the claim of the Respondent cannot be accepted. 26. The Respondent has also averred that he had procured the cinema license at a higher rate from the market and he had been procuring the right to exhibit the movies from the producers/ distributors, who decided the prices for his movies based on the demand of the movie. Hence, the amount that was being alleged to have been profiteered had been paid to the producers/distributors. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entire period and hence we do not see any reason to accept this contention of the Respondent. We further observe that had the Respondent passed on the benefit before 30.06.2019, he would have been investigated only till that date. However, it has also been revealed from the Report of the DGAP that the Respondent has reduced the base prices of the tickets to ₹ 75/- and ₹ 45/- for the first class and the second class tickets for a certain period from 11.03.2019 to 08.05.2019 and thus, the same has been considered by the DGAP while calculating profiteering. Therefore the period of investigation from 01.01.2019 to 30.06.2019 has been rightly taken by the DGAP. 29. This Authority based on the facts discussed above has found that the Respondent has resorted to profiteering 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 exhibition of cinematograph films where price of admission ticket is one hundred rupees or less from 18% to 12% w.e.f. 01.01.2019 to 30.06.2019. On this acc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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