2020 (9) TMI 497 - NAPA - GST

Respondent rectifies GST benefit violation, deposits profiteered amount with interest, no penalty imposed.

Principal Commissioner, Central Tax & Central Excise, Hyderabad, Director-General of Anti-Profiteering, Indirect Taxes & Customs Versus M/s Inox Leisure Ltd.

Principal Commissioner, Central Tax & Central Excise, Hyderabad, Director-General of Anti-Profiteering, Indirect Taxes & Customs Versus M/s Inox Leisure ... Issues Involved:1. Whether the Respondent passed on the commensurate benefit of reduction in the GST rate to his customers.2. Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017 committed by the Respondent.Issue-wise Detailed Analysis:1. Whether the Respondent passed on the commensurate benefit of reduction in the GST rate to his customers:The main issue examined was whether the GST rate on 'Services by way of admission to the exhibition of cinematograph films where the price of admission ticket was above one hundred rupees' was reduced from 28% to 18% w.e.f. 01.01.2019 and if so, whether the benefit of such reduction in the rate of GST had been passed on by the Respondent to his recipients, in terms of Section 171 of the CGST Act, 2017.The DGAP confirmed that the Central Government, on the recommendation of the GST Council, had indeed reduced the GST rate from 28% to 18% w.e.f. 01.01.2019. The legal requirement under Section 171 was that there must be a commensurate reduction in prices of the goods or services. The DGAP's investigation revealed that the Respondent had not reduced the selling prices of the movie tickets commensurately with the reduction in GST rate. Instead, the Respondent increased the base prices, resulting in the same selling prices post-GST rate reduction, thereby denying the benefit to the customers.The DGAP's methodology involved comparing the average base prices of tickets pre and post-GST rate reduction. The investigation covered two classes of tickets: 'Executive' and 'Royal'. The DGAP found that the Respondent had profiteered by Rs. 11.73 per ticket for 'Executive' and Rs. 21.88 per ticket for 'Royal' categories. The total profiteered amount was Rs. 4,20,731/- for the period from 01.01.2019 to 06.01.2019.2. Whether there was any violation of the provisions of Section 171 of the CGST Act, 2017 committed by the Respondent:The Respondent argued that the ticket prices were regulated by local enactments in Telangana, and he had no say in the prices charged. Despite this, he claimed to have reduced the prices suo moto and deposited the profiteered amount along with interest in the Consumer Welfare Funds. The DGAP confirmed that the Respondent had indeed deposited Rs. 4,20,936/- against the profiteered amount of Rs. 4,20,731/- along with interest of Rs. 10,065/- in the Consumer Welfare Funds.The Authority found that the Respondent had contravened the provisions of Section 171 (1) by not passing on the benefit of GST rate reduction to the customers during the period from 01.01.2019 to 06.01.2019. However, since the Respondent had rectified the mistake and deposited the profiteered amount along with interest before the initiation of the proceedings, the profiteered amount was confirmed and regularized. No further direction was required as the Respondent had reduced his prices commensurately w.e.f. 07.01.2019.The Authority concluded that although the Respondent had violated Section 171 (1), no penalty was imposed due to the voluntary deposit of the profiteered amount and interest. The order was passed considering the COVID-19 pandemic as a force majeure, extending the deadline for passing the order.Conclusion:The Respondent was found to have violated Section 171 (1) of the CGST Act, 2017 by not passing on the benefit of GST rate reduction to his customers. However, the Respondent had rectified the issue by depositing the profiteered amount along with interest in the Consumer Welfare Funds. The Authority confirmed the deposit and regularized the profiteered amount without imposing any penalty.