Anti-profiteering rule on GST rate cuts: cinema ticket prices had to fall commensurately, and failure meant section 171 breach.

A reduction in GST from 28% to 18% on cinema admission services had to be passed on through a commensurate reduction in ticket prices. On the class-wise ticket sales and average base price comparison, the prices were not reduced sufficiently for the period up to 06.01.2019, so the tax benefit was not fully passed on to customers. That failure constituted a contravention of section 171 of the CGST Act, 2017. The profiteered amount, with interest, had already been deposited in the Consumer Welfare Funds, and because recipients could not be identified, no further payment direction or penalty was required.

---

---

Issues: (i) Whether the benefit of reduction in GST rate from 28% to 18% on cinema admission services was passed on to customers by commensurate reduction in ticket prices. (ii) Whether the respondent contravened section 171 of the Central Goods and Services Tax Act, 2017 and what relief, if any, followed from the finding.

Issue (i): Whether the benefit of reduction in GST rate from 28% to 18% on cinema admission services was passed on to customers by commensurate reduction in ticket prices.

Analysis: The applicable legal framework required that any reduction in the rate of tax be passed on to recipients by way of commensurate reduction in prices. The rate on admission to cinematograph exhibition where the ticket price was above one hundred rupees was reduced with effect from 01.01.2019. The price comparison undertaken on the basis of class-wise ticket sales and average base price showed that, for the relevant period up to 06.01.2019, the ticket prices were not reduced commensurately and the benefit of the tax reduction was not fully passed on to customers. The subsequent price revision from 07.01.2019 did not alter the position for the earlier period.

Conclusion: The benefit of the rate reduction was not passed on commensurately for the period found in investigation.

Issue (ii): Whether the respondent contravened section 171 of the Central Goods and Services Tax Act, 2017 and what relief, if any, followed from the finding.

Analysis: Since the reduced tax benefit was not passed on for the relevant period, the statutory mandate under section 171 stood violated. The profiteered amount was quantified on the basis of the investigation report, and the amount together with interest had already been deposited in the Consumer Welfare Funds. As the recipients were not identifiable, no further payment direction was necessary and no penalty was proposed in view of the timing of the violation and the deposit already made.

Conclusion: The respondent contravened section 171, the profiteered amount was confirmed, and no further direction for payment or penalty was required.

Final Conclusion: The proceeding ended with confirmation of anti-profiteering violation for the relevant period, regularisation of the amount already deposited in the Consumer Welfare Funds, and closure without any further penal consequence.

Ratio Decidendi: A supplier must pass on every reduction in GST rate through commensurate reduction in prices at the level of each taxable supply, and failure to do so constitutes contravention of section 171 even if the supplier later remedies the pricing for a subsequent period.

---