Cinema operator profiteered Rs.7,19,187 by not passing GST rate reduction benefits to consumers on movie tickets

CCI held that the respondent cinema operator engaged in profiteering by failing to pass on GST rate reduction benefits on movie tickets priced <=Rs.100 (reduced from 18% to 12% from 01.01.2019 to 30.09.2019). The respondent maintained same selling prices while increasing base prices, realizing additional Rs.7,19,187. CCI directed deposit of profiteered amount with 18% interest into Central and State Consumer Welfare Funds within 3 months. However, penalty under Section 171(3A) CGST Act could not be imposed as the provision was inserted retrospectively from 01.01.2020.

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Issues Involved:
1. Alleged profiteering by the Respondent by not passing on the benefit of GST rate reduction.
2. Investigation and findings by the Director-General of Anti-Profiteering (DGAP).
3. Responses and submissions by the Respondent.
4. Determination of the profiteering amount and order for its deposit.

Summary:

Issue 1: Alleged Profiteering
The Applicant No. 1 alleged that the Respondent did not pass on the benefit of reduction in GST rate on movie admission tickets from 18% to 12% w.e.f. 01.01.2019. Instead, the Respondent increased the base price to maintain the same cum-tax selling price, as detailed in Table-A.

Issue 2: Investigation and Findings by DGAP
The DGAP conducted a detailed investigation and found that the Respondent did not reduce the selling prices commensurately with the GST rate reduction. The DGAP's analysis showed that the Respondent increased the base prices of tickets, thereby denying the benefit of the reduced GST rate to consumers. The DGAP concluded that the Respondent profiteered an amount of Rs. 7,19,187/- during the period from 01.01.2019 to 30.09.2019.

Issue 3: Responses and Submissions by the Respondent
The Respondent argued that the theatre business operates on a day-to-day basis without stock in hand and that ticket prices are controlled by the Licensing Authority. The Respondent also claimed that any benefit from the GST rate reduction was reflected in the tax rate and not in the base price. The DGAP countered that the Licensing Authority only sets the maximum price and that the Respondent was free to reduce ticket prices to pass on the tax benefit.

Issue 4: Determination of Profiteering Amount and Order for its Deposit
The Commission found that the Respondent did not pass on the benefit of the GST rate reduction to consumers, as required under Section 171 of the CGST Act, 2017. The Respondent was directed to deposit the profiteered amount of Rs. 7,19,187/- along with 18% interest in the Central and Telangana State Consumer Welfare Funds. The penalty under Section 171 (3A) could not be imposed retrospectively as it was not in force during the period of violation. The jurisdictional Commissioners of CGST/SGST Telangana were directed to monitor the deposit of the profiteered amount.

Conclusion:
The Commission concluded that the Respondent had committed profiteering by not passing on the benefit of GST rate reduction and ordered the deposit of the profiteered amount along with interest into the respective Consumer Welfare Funds.

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