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TMI Blog2023 (12) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 price to maintain the same cum-tax selling price as detailed in Table-A' below:- Table-"A" Category of Ticket Price of Ticket is Rs. 100/- Price of Ticket is Rs. 80/- Price of Ticket is Rs. 60/- Price of Ticket is Rs. 30/- Before (01.01.2019) Base Price 84.75 67.80 50.85 25.42 Tax Rate 18% 18% 18% 18% Tax Amount 15.25 12.20 9.15 4.58 Total 100.00 80.00 60.00 30.00 On or after (01.01.2019) Base Price 89.29 71.43 53.57 26.79 Tax Rate 12% 12% 12% 12% Tax Amount 10.71 8.57 6.43 3.21 Total 100.00 80.00 60.00 30.00 Price without profiteering ought to be Base Price 84.75 67.80 50.85 25.42 Tax Rate 12% 12% 12% 12% Tax Amount 10.17 8.14 6.10 3.05 Total 94.92 75.94 56.95 28.47 Alleged Profiteering Profiteering amount per Ticket 5.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .01.2020 and 23.01 2020. The replies of the Respondent have been summed up as follows:- a) The Respondent has submitted that his theatre was having single screen and four classes namely (a) Balcony, (b) Dress Circle, (c) 1st Class and (d) 2nd class. The ticket slab rates were as is furnished in Table-'B':- Table-"B" S.No. Class Ticket Price (Inc. GST) Cost of ticket when GST was 18% Cost of ticket when GST was 12% 1 Balcony 100 84.75 89.29 2 Dress Circle 80 67.80 71.43 3 1st Class 60 50.85 53.57 4. 2nd Class 30 25.42 26.79 b) The Respondent also informed that when big films were released, the distributors got special permission from Hon'ble High Court to increase the cost of tickets for one week and after getting permission from Hon'ble High Court, the revised ticket prices were fixed. vii. Vide the aforementioned letters; the Respondent had submitted the following documents/information:- a) Copies of GSTR-1 & GSTR-3B returns for the period December, 2018 to September, 2019. b) Register of daily sales of tickets for the period December, 2018 to September, 2019. c) Details of Class Wise Monthly Summary of Box Office Collection for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent's theater, namely, 'Balcony', 'Dress Circle', 1st Class' and Rs. 2nd Class'. For the purpose of determination of profiteering, the number of tickets sold during the period 01.12.2018 to 31.12.2018 (pre-GST rate reduction) were taken and an average base price (after discount) was obtained on dividing the total taxable value by total number of tickets sold during this period. The average commensurate selling price of the ticket was compared with the actual selling price of the tickets sold during post-GST rate reduction i.e. on or after 01.01.2019 as illustrated in the Table-'C' below:- Table-'C' (Amount in Rupees) SI.No. Description Factors Pre-Rate Reduction (01.12.2018 to 31.12.2018) Post Rate Reduction (Fom 01.01.2019) 1. Theatre Name A Amba 70mm 2. Ticket Category B Balcony 3. Ticket Selling Price C 100/- 100/- 4. Total No. of tickets sold D 6,776 5. Total taxable value (after Discount, if any) E 5,74,266/- 6. Average base price (without GST) F=(E/D) 84.75/- 7. GST Rate G 18% 12% 8. Actual Selling price (post rate reduction) (including GST) H=118% of F 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the recipients appeared to be correct. The DGAP has stated that the total amount of profiteering covering the period from 01.01.2019 to 30.09.2019, was Rs. 7,19,187/-. The recipients of the services were not identifiable as no such details of the consumers have been provided. 3. The above Report was considered by the erstwhile Authority in its meeting held on 06.03.2020 and it was decided that the Applicants and the Respondent be given an opportunity of hearing on 24.03.2020 and to file their submissions before the Authority. Notice dated 06.03.202 was issued to the above Respondent asking him to explain why the Report dated 03.03.2020 furnished by the DGAP should not be accepted and his liability for violating the provisions of Section 171 of the above Act should not be fixed. Meanwhile, the Respondent had filed Writ Petition (Civil) No. 18660/2020 before the Hon'ble High Court of Telangana. The proceedings were stayed by the Hon'ble Court in the present case. The Hon'ble Court vide order dated 10.03.2021 has disposed of the aforesaid Writ Petition directing the Respondent to submit his explanation in response to the erstwhile Authority's notice dated 06.03.2020 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld come into effect in such case. In this case, there was no stock or service involved after week end. Every Thursday was a day when week ended for cinema theatre. If the tax was effective w.e.f. 01.01.2019 then at the most, it could be affected on the theatre owner for that week only ending on 03.01.2019. Therefore, the Respondent has claimed that service was not provided after 03.01.2019 as new film was released and the rate of admission was controlled by State Government Authorities. (d) Some times when big films were released, the distributor would get special permission to increase the cost of tickets for one week. After getting the permission from Hon'ble High Court he would fix the revised rates of tickets. Accordingly, when the cost of tickets excluding GST exceeded Rs. 100/-, he would collect 18% GST on the ticket cost and pay the GST accordingly. (e) As the rate of GST tax was reduced from 18% to 12% and the base price was changed and parallelly, the difference was reflected in GST rate. The following calculation has been given for reference:- SI. No. Class Rate of Admission GST tax 18/118% Basic Price 18/118% GST Tax 12/112% GST Tax 12/112% 1 Balcony 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of reduction in tax rates. (d) As already submitted the State Government only fixed the maximum rate of movie ticket. The cinema management was free to sell the tickets at the lower price e.g. in the event of reduction of taxes. The State Government came into picture only when the cinema management wanted to increase the price of tickets beyond the maximum rate already fixed. (e) Further, reference was also made to the provisions of Section 171 of Central Goods and Services Tax Act, 2017 which governed the anti-profiteering provisions under GST which read as "Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices." Thus, the legal requirement was that in the event of benefit of input tax credit or reduction in rate of tax, there must be a commensurate reduction in prices of the goods or services, Such reduction could obviously only be in absolute terms, so that the final price payable by a consumer must get reduced. This was the legally prescribed mechanism for passing on the benefit of input tax credit or reduction in rate of tax to the recipients under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of tax was passed on or not to the recipients as provided under Section 171 of the CGST Act, 2017. 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 shall be passed on to the recipient by way of commensurate reduction in prices." (2). The Central Government may, on recommendations of the Council, by notification, constitute an Authority, or empower an existing Authority constituted under any law for the time being in force, to examine whether ITC availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him. (3). The Authority referred to in sub-section (2) shall exercise such powers and discharge such functions as may be prescribed. (3A) Where the Authority referred to in sub-section (2) after holding examination as required under the said sub-section comes to the conclusion that any registered person has profiteered under sub-section (1), such person shall be liable to pay penalty equivalent to ten percent of the amount so profiteered: PROVIDED that no penalty sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serves that there was reduction in GST Tax rate from 18% to 12% not increase as stated by the Respondent above. The Respondent should have kept his base prices same to transfer the benefit of Rate reduction to the consumers. Instead, he increased the base prices of tickets thereby pocketing the profit. Therefore, the above contention of the Respondent cannot be accepted. 9. The Commission finds that, as per the details and calculations given in Tables & 'D' above, the Respondent has profiteered by way of increasing the base prices of the tickets (Services) by not reducing the selling prices of the tickets (Services) commensurately, despite the rate reduction in GST rate on "Services by way of admission to exhibition of cinematography films where price of admission ticket was one hundred rupees or less" from 18% to 12% w.e.f. 01.01.2019. From the Table 'D' above, it is evident that the base prices of the admission tickets were indeed increased, as a result of which the benefit of reduction in GST rate from 18% to 12% (w.e.f. 01.01.2019), was not passed on to the recipients by way of commensurate reduction in prices charged (including lower GST @ 12%). The total amou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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