Respondent failed to pass GST rate reduction on movie tickets, directed to deposit profiteered amount.

The Respondent in the case failed to pass on the benefit of a GST rate reduction on movie admission tickets from 18% to 12%, as required by Section 171 of the CGST Act, 2017. The investigation revealed that the Respondent increased ticket prices despite the rate reduction, resulting in a profiteered amount of Rs. 2,23,850/-. The Respondent was directed to deposit this amount with interest into specified welfare funds within three months. Failure to comply would lead to recovery by the Commissioner CGST and SGST. The Order emphasized the importance of complying with the statutory provisions and monitoring by the relevant authorities.

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Issues Involved:
1. Alleged profiteering by the Respondent in respect of the supply of services by way of admission to the exhibition of cinematograph films.
2. Compliance with Section 171 of the CGST Act, 2017 regarding the reduction in GST rate from 18% to 12%.
3. Determination of the profiteered amount and its deposition.

Detailed Analysis:

Issue 1: Alleged Profiteering by the Respondent
The case arose from an application alleging that the Respondent did not pass on the benefit of GST rate reduction on movie admission tickets from 18% to 12%, effective from 01.01.2019, as per Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018. Instead, the Respondent was accused of increasing the base prices to maintain the same cum-tax selling prices. The investigation by the Director-General of Anti-Profiteering (DGAP) revealed that the Respondent sold tickets at prices not reflecting the GST rate reduction, thus limiting the investigation to the reduced GST rate for three specified categories of tickets.

Issue 2: Compliance with Section 171 of the CGST Act, 2017
Section 171 (1) of the CGST Act mandates that any reduction in the tax rate must be passed on to the recipient by way of a commensurate reduction in prices. The DGAP's investigation found that the Respondent increased the base prices of tickets despite the GST rate reduction, thereby not passing the benefit to the consumers. The Respondent contended that the ticket prices were regulated by the State Government and that he faced practical difficulties in reducing prices. However, the DGAP found no evidence supporting the Respondent's claims and observed that the Respondent's actions did not comply with Section 171.

Issue 3: Determination of the Profiteered Amount and its Deposition
The DGAP calculated the profiteered amount to be Rs. 2,23,850/- based on the increase in base prices for the period from 01.01.2019 to 30.06.2019. The Respondent was directed to deposit this amount along with interest calculated at 18% from the date of collection until the deposit date. Since the recipients were not identifiable, the amount was to be deposited equally in the Central Consumer Welfare Fund (CWF) and the Telangana State CWF. The Respondent was given three months to comply, failing which the amount would be recovered by the Commissioner CGST and SGST as per the SGST Act, 2017.

Conclusion:
The Authority found that the Respondent had not passed on the benefit of GST rate reduction as required under Section 171 of the CGST Act, 2017. The Respondent was ordered to reduce ticket prices accordingly and deposit the profiteered amount with interest into the specified welfare funds. The Commissioners of SGST Telangana were directed to monitor compliance, and a report was to be submitted within three months. The Order was passed on 17.11.2020, considering the delay due to the COVID-19 pandemic.

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