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TMI Blog2023 (12) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... eering by the Respondent 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 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. ii. The above application was examined by the Standing Committee on Anti-profiteering, in its meeting held on 15.05.2019, the minutes of which were received by the DGAP on 28.06.2019, whereby it was decided to forward the same to the DGAP to conduct a detailed investigation in the matter. Accordingly, it was decided to initiate an investigation and collect evidence necessary to determine whether the benefit of reduction in rate of tax had been passed on by the Respondent to the recipients in respect of supply of "Services by way of admission to exhibition of cinematography films" supplied by the Respondent. iii. The Standing Committee had forwarded the following submission/documents of the Applicant No. 1:- a) Anti-profiteering Application f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2019 Ticket Price GST Rate(%) GST Amount Total price collected from customer Ticket Price GST Rate(%) GST Amount Total price collected from customer Balcony 76.30 18% 13.70 90.00 89.29 12% 10.71 100.00 Dress Circle 59.00 18% 11.00 70.00 71.43 12% 8.57 80.00 Upper Class 42.00 18% 8.00 50.00 53.58 12% 6.42 60.00 Lower Class 16.95 18% 3.05 20.00 26.79 12% 3.21 30.00 b) With the notification relating to reduction of GST rate on movie tickets from 18% to 12%, the price to be charged reduced to Rs. 85.42/- (base price 76.27+GST 9.15) but however he had increased the base price to Rs. 89.28/- from 10.01.2019 after obtaining all the necessary approvals from Asst. Commissioner of State Tax, Office of the Commissioner of police and Office of the Inspector of police. The prices of the movie admission tickets for 4 categories pre & post 10.01.2019 have been given in Table-B below :- Table-B Name of Category/Class Price before 10.01.2019 Price from 10.01.2019 Balcony 90.00 100.00 Dress Circle 70.00 80.00 Upper Class 50.00 60.00 Lower Class 20.00 30.00 The Respondent had further submitted that he had increased the rate of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 80.36/- for Rs. 90/- ticket, from Rs. 59.33/- to Rs. 62.50/- for Rs. 70 ticket, from Rs. 42.371- to Rs. 44.64/- for Rs. 50/- ticket and from Rs. 16.95/- to Rs. 17.86/- for Rs. 20/- ticket. ix. The Central Government, on the recommendation of the GST Council, reduced the GST rate on the product "Services by way of admission to exhibition of cinematography films where price of admission ticket was above one hundred rupees" was reduced from 28% to 18% w.e.f. 01.01.2019 and "Services by way of admission exhibition of cinematography films where price of admission ticket was one hundred rupees or less" were reduced from 18% to 12% w.e.f. 01.01.2019 vide Notification No. 27/2018- Central Tax (Rate) dated 31.12.2018 which has not been contested by the Respondent. x. Section 171 (1) of Central Goods and Services Tax Act, 2017 which governed the anti-profiteering provisions under GST stated that "Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit should be passed on to the recipient by way of commensurate reduction in prices." Thus, the legal requirement was that in the event of a benefit of input tax credit or reduction in rate of tax, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Upper Class and from Rs. 20/- to Rs. 30/- for Lower Class. Therefore, in terms of Section 171 of the CGST Act, 2017, benefit of GST rate reduction from 18% to 12% in respect of "Services by way of admission to exhibition of cinematography films upto one hundred rupees", was not passed on to the recipients. xiv. On the basis of aforesaid pre/ post reduction in GST rates and the details of outward supplies for the period 01.12.2018 to 31.07.2019 submitted by the Respondent, it was observed that profiteering during the period from January, 2019 to July, 2019 from the sale of tickets in four categories mentioned in Table D' above amounted to Rs. 5,21,694/- for Balcony, Rs. 3,30,735/- for Dress Circle, Rs. 84,131/- for Upper Class and Rs. 5,26,044/- for Lower Class. The total amount of net higher sale realization due to increase in the base prices of the movie tickets, despite the reduction in GST rate from 18% to 12% or in other words, the profiteered amount came to Rs. 14,62,604/-. The details of the computation have been given in the Table "E" below:- xv. On the basis of the details of outward supplies of the tickets (Services) submitted by the Respondent, the DGAP has observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the erstwhile NAA and the Commission to the interested parties on 07.01.2020, 30.01.2020, 19.02.2020, 05.03.2020, 09.06.2022, 17.08.2023 and 09.11.2023. During the course of proceedings, the Respondent has filed his submissions dated 18.02.2020 wherein he has reiterated the submissions he had filed before the DGAP which are mentioned in Para 2 (vi) supra. The Respondent vide his submissions dated 10 12.2021, 06.06.2022 and 09.06.2022 has inter-alia stated that: - (a) The Respondent was located at Chikkadpally, Hyderabad and was screening films with valid cinematography license issued by the Licensing Authority and paying the Entertainment Tax and after introduction of GST the Respondent was paying the Tax as per GST Act. The Central Government had reduced the rate of Tax under GST from 28% to 18% and 18% to 12% on the Cinema Ticket admissions with effect from 01.01.2019. (b) The cinema business was totally a day to day and show to show business and there was no question of having stock in hand. The theatre was screening the films on show basis i.e., daily four (4) shows and weekly Twenty Eight (28) shows. The theatre has no independent right to increase or decrease the ticket p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned the tax separately and were paying the same. The G.O. which reduced the GST rate was issued from 01.01.2019 and the Respondent did not have any stock which attracted Profiteering. Every show was a new show, and every week new film was released and it was not a new commodity and getting profit for the old stock unlike the goods, would not attract in the case of the cinema business. A new film was released on 10.01.2019 and rates were charged from 10.01.2019 on the basis of the application made by the Respondent. Therefore, reduced tax was implemented and collected with the ticket rate only and there was no chance to gain illegally by the Respondent. 5. The DGAP vide his supplementary Reports dated 25.02.2020 and 29.04.2022 on the Respondent's submissions dated 18.02.2020, 10.12.2021, 06.06.2022 and 09.06.2022 has submitted as under: - (a) The DGAP did not look into aspect of costing in the course of investigation of profiteering. As per Section 171 of the CGST Act, 2017, any benefit of rate reduction should be passed on to the buyers. The Respondent has also contended that after a new film was released, it was totally a new business and there was no accommodation to stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 shall be leviable if the profiteered amount is deposited within thirty days of the date of passing of the Order by the Authority. Explanation: - For the purpose of this section, the expression "profiteered" shall mean the amount determined on account of not passing the benefit of reduction in rate of tax on supply of goods or services or both or the benefit of input tax credit to the recipient by way of commensurate reduction in the price of the goods or services of both." 7. The Respondent has argued that the cinema business was totally a day to day and show to show business an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f. 01.01.2019. From the Table 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 amount of profiteering covering the period from 01.01.2019 to 31.07.2019, comes to Rs. 14,62,604/-. 10. This Commission 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 services 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 cinematography films where price of admission ticket was one hundred rupees or less" from 18% to 12% w.e.f. 01.01.2019 to 31.07.2019. On this account, the Respondent has realized an additional amount to the tune of Rs. 14,62,604/- from the recipients which included both the profiteered amount and GST on the said profiteered amount. Thus, the profiteering amount is determined as Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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