TMI Blog2021 (5) TMI 934X X X X Extracts X X X X X X X X Extracts X X X X ..... in the month of May, 2019, this price increase cannot be correlated to provisions of Section 171 of the CGST Act, 2017. It is also a fact that the DGAP has reported that in the post-tax-rate reduction period, the Respondent has maintained the same base prices in respect of the Upper and Lower Balcony categories of movie tickets and hence, it is observed that there is no profiteering in the above category of these movie tickets. Therefore, though profiteering has been established against the Respondent in the categories of First class and Second class movie tickets, the computation of profiteering merits to be limited only up to 10-3-2019 as the Respondent had reduced the base prices commensurately for the First class and Second class movie tickets after 11-3-2019. No profiteering can thus arise for the period after 11-3-2019. Therefore, this case is a fit case for recomputation of the amount of profiteering - under the provisions of Rule 133(4) of the CGST Rules, 2017, this Authority directs the DGAP to recompute the amount of profiteering in line with the observations made in the preceding paragraph. The DGAP is further directed to furnish his Report under Rule 129(6) of the CGST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 31-12-2018 and that the Respondent had instead increased the base price of the tickets. Along with the application, the Standing Committee has also forwarded the Annexure to APAF-1 confirming the fact of an increase in the base prices of the tickets and letter dated 31-12-2018 and 13-2-2019 of the Respondent to the State Standing Committee on Anti-Profiteering. 3. The DGAP has stated that on receipt of the aforesaid reference from the Standing Committee on Anti-profiteering, a notice under Rule 129 of the Rules was issued on 9-7-2019 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. 1-1-2019 to his 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 to furnish all documents in support of his reply. The Respondent was also allowed to inspect the non-confidential evidence/information which formed the basis of the said notice, during the period from 17-7-2019 to 19-7-2019. However, the Respondent did not avail of the said opportunity. The DGAP has reported that the period covered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST Rate GST Rate 18% Rs. Rs. 12% Rs. Rs. 12% Rs. Rs. 12% Rs. Rs. Upper Lower Balcony 18 100 118 12 100 112 12 100 112 12 100 112 First Class 12.20 67.80 80 8.57 71.43 80 8.03 66.97 75 8.57 71.43 80 Second Class 7.63 42.37 50 5.35 44.65 50 4.82 40.18 45 5.35 44.65 50 5. The Respondent, vide the afore-mentioned e-m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 of the CGST Act, 2017 the legal requirement was very clear that in the event of a benefit of ITC or reduction in the rate of tax, there must be a commensurate reduction in prices of the goods or services. Such reduction could be only in terms of money, such that the final price payable by a consumer got reduced commensurate with the reduction in the tax rate. This was the legally prescribed mechanism for passing on the benefit of ITC or reduction in the rate of tax to the recipients under the GST regime and there was no other method to pass on such benefits. From 1-1-2019, the Respondent, in terms of Section 171 of the CGST Act, 2017, was bound to maintain the base prices of the tickets across all class of seats/slots and GST should have been charged on the pre rate reduction base prices. 10. The DGAP has reported that after examination of the details of sales data, letter of the Applicant No. 1, and the replies submitted by the Respondent it was observed that there were three categories of tickets i.e. Upper and Lower Balcony-₹ 118/-, First Class-₹ 80/- and Second Class-₹ 50/- sold by the Respondent during the pre-rate reduction period effective from 1-12-20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed on the benefit of GST rate reduction from 18% to 12% in respect of Services by way of admission to the exhibition of cinematography films to the recipients in terms of Section 171 of the CGST Act, 2017. 13. The DGAP has also reported that vide letter dated 24-7-2019, the Respondent has submitted that he had reduced the base price of the tickets to ₹ 75/- from ₹ 80/- and to ₹ 45/- from ₹ 50/- for the First class and Second class tickets, respectively, during the period from 11-3-2019 to 8-5-2019 during the post-tax rate reduction period. Upon analyzing the same it has come to light that for the period from 11-3-2019 to 8-5-2019 the Respondent had reduced the base prices for First and Second Class tickets to lower than the pre-rate reduction prices while maintaining unchanged base prices for the upper and lower balcony tickets. And hence, the actual prices paid during the above mentioned period by the customers were less than the commensurate prices of the ticket in respect of the First and Second Class and hence, the period from 11-3-2019 to 8-5-2019 has been excluded from the final calculation of the amount of profiteering by the DGAP and detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e DGAP has stated that based on the aforesaid reduction in GST rate and the details of outward supplies for the period from 1-12-2018 to 30-6-2019 submitted by the Respondent, it was found that profiteering during the period from January, 2019 to June, 2019 from the sale of tickets in three categories amounted to ₹ 0/- for Upper and Lower Balcony (due to not increasing the base prices), ₹ 39,066.46/- for the First Class and ₹ 90,176.39/- for the Second Class. The total amount of net higher sales realization due to the increase in the base price of the movie tickets, despite the reduction in GST rate from 18% to 12% or in other words, the profiteered amount arrived at was ₹ 1,29,243/-. (excluding the period from 11-3-2019 to 8-5-2019) The computation has been furnished by the DGAP in the Table C below :- Table-C (Amount in Rs.) S. No. Admission ticket 1-1-2019 to 10-3-2019 9-5-2019 to 30-6-2019 Base Price char-ged (Rs.) Commensurate Base Price (Rs.) The excess amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entifiable as no such details of the consumers had been provided by the Respondent. Based on the details of outward supplies of the tickets (Services) submitted by the Respondent, it was observed that he had sold admission tickets in the State of Telangana only. 17. The investigation report was received by this Authority on 27-12-2019 and it was decided to accord an opportunity of hearing to the Applicants and the Respondent on 20-1-2020. Notice dated 1-1-2020 was also issued to the Respondent directing him to explain why the Report dated 27-12-2019 furnished by the DGAP should not be accepted and his liability for violation of the provisions of Section 171 of the CGST Act, 2017 should not be fixed. Sh. Raj Tadla, Partner appeared in person and vide submissions dated 27-1-2020 has submitted :- (a) That from the date when the tax rate was reduced, he had charged the reduced price to his customers. (b) That since a movie ticket was a service and no stocking was required, he did not have any benefit of ITC due to tax rate changes and that he had forwarded the benefit of ITC accrued to his customers. (c) That he has been provided with a range of ticket prices by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns and has stated :- (a) That the legality of the investigation conducted by him was derived from Section 171(1) of the CGST Act, 2017 which governed anti-profiteering provisions under GST law. As per the provisions of Section 171 of the Act, the legal requirement was that in the event benefit of ITC or reduction in the rate of tax, there must be a commensurate reduction in the prices of the goods or services. Such reduction could obviously be only in monetary terms so that the final price payable by a consumer got reduced commensurately with the reduction in the tax rate. Accordingly, the investigation carried out by DGAP had looked into the aspect of price reduction as per the Notification No. 21/2018-Central Tax (Rate), dated 31-12-2018 by which the Central Government on the recommendation of the GST Council had reduced the GST rate on Services by way of admission to exhibition of cinematographic films where price of admission ticket is above one hundred rupees from 28% to 18% w.e.f. 1-1-2019 and 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. 1-1-2019. (b) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission, the Respondent has mentioned that the ticket prices were controlled by the film owners/producers/ distributors based on the demand for the film. However, the Respondent has not submitted any document to prove that rates were controlled by either. The Respondent has neither submitted the order showing fixation/capping of prices by the State Government nor any agreement showing price negotiations made by the film owners/producers/distributors. It was also important to mention that irrespective of who decided the prices of admission tickets, the main issue was that the benefit of reduction in the rate of tax has to be passed on to the buyers by reducing the final prices commensurately. The quantum of the amount of profiteering calculated was based on prices of the admission tickets pre and post rate reduction taken from the outward sales details provided by the Respondent during the course of the investigation. (f) That the entire investigation was conducted under the provisions of Section 171 of the CGST Act, 2017 read with Rule 129 of the CGST Rules, 2017, as per the directions of the Standing Committee on Anti-profiteering, and the investigation report was submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent 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. 1-1-2019, 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. 21. 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, which provides as under :- (1) Any reduction in rate of tax on any supply of goods or services or the benefit of ITC shall be passed on to the recipient by way of commensurate reduction in prices. (2) The Central Government may, on recommenda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of ITC due to tax rate changes. In this connection, it would be relevant to mention that the DGAP has carried out the investigation in respect of the services provided by the Respondent and looked into the aspect of price reduction as per the Notification No. 27/2018-Central Tax (Rate), dated 31-12-2018. Therefore, the question of stocking of the goods does not arise in the present case and the same does not have any impact on the amount of profiteering. Hence, the above contention made by the Respondent is not correct. 24. The Respondent has argued that the State Government has provided him with a range of ticket prices within which he kept changing the prices of the tickets based on various factors like new/old movie, age performance of the movie. In this connection, it has been 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, has found that the prices of the admission tickets remained more or less uniform post-tax rate reduction and were not changed dynamically. Further, the Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that he had reduced the prices of his movie tickets commensurately with the reduction in the rate of tax w.e.f. 11-3-2019 and that he had subsequently increased the prices of the movie tickets w.e.f. 9-5-2019. We also find that this contention of the Respondent has also been incorporated by the DGAP in Para 16 of his report dated 27-12-2019, which reads as under :- However, the Noticee vide letter dated 24-7-2019 submitted that they had reduced the base price of the tickets to ₹ 75/- and ₹ 45/- (for the first class and second class tickets) for certain period i.e., w.e.f. 11-3-2019 to 8-5-2019 post GST period : Upon analyzing the same it has come to light that for the period as mentioned below i.e. 11-3-2019 to 8-5-2019 the Noticee had reduced the base prices for First and Second Class tickets to lower than the pre-rate reduction prices while maintaining the same base price for upper and lower balcony tickets. The same has been illustrated for easy reference as Table B below. As a result of this, the actual prices paid in this period by the end-users had been less than the commensurate prices of the ticket. Hence, the relevant period has been excluded from the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tickets has been reduced commensurately by the Respondent w.e.f. 11-3-2019. Since he has complied with the provisions of Section 171 of the CGST Act, 2017, the period from 11-3-2019 has no relevance from the perspective of Section 171 of the CGST Act, 2017, and hence, no profiteering can be established for the period after 11-3-2019. While taking this view, we take into cognizance of the fact that this Authority is not a price regulator. Thus, in this case, since the Respondent has increased the price of the movie tickets of the First and the Second class categories only in the month of May, 2019, this price increase cannot be correlated to provisions of Section 171 of the CGST Act, 2017. It is also a fact that the DGAP has reported that in the post-tax-rate reduction period, the Respondent has maintained the same base prices in respect of the Upper and Lower Balcony categories of movie tickets and hence, we observe that there is no profiteering in the above category of these movie tickets. Therefore, though profiteering has been established against the Respondent in the categories of First class and Second class movie tickets, the computation of profiteering merits to be limited ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
