Cinema ticket pricing failure to pass GST rate reduction, profiteering Rs 11,88,482 including GST; interest waived

Whether respondent violated Section 171 CGST by not passing on GST rate reduction: Section 171 imposes an affirmative obligation to pass tax-rate reductions by way of commensurate reduction in prices; compliance with State cinema regulatory ceilings is a procedural constraint and does not excuse non-passing. Outcome: contravention established and profiteering quantified at Rs. 11,88,482/-. Whether GST remitted to Government can be excluded from profiteered amount: the statutory scheme requires reduction in the all-inclusive price to benefit the consumer; remittance of GST to the exchequer does not negate consumer detriment. Outcome: GST component is included in the profiteered amount. Interest and penalty: interest under Rule 133(3)(c) is prospective from 28.06.2019 and was prorated for three days but waived in exercise of discretion; Section 171(3A) penalty not imposable as it came into force after the violation period. Outcome: interest waived; no penalty.

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Issues: (i) Whether the Respondent contravened Section 171 of the CGST Act by not passing on the benefit of GST rate reduction and profiteered an amount of Rs. 11,88,482/-; (ii) Whether interest and penalty are payable on the profiteered amount and if so from which date.

Issue (i): Whether the Respondent contravened Section 171 of the CGST Act by not passing on the benefit of GST rate reduction and profiteered an amount of Rs. 11,88,482/-.

Analysis: The statutory mandate requires passing the benefit of tax rate reduction to recipients by commensurate reduction in the total price charged (base price plus tax). The adopted method computes a commensurate base price by applying the reduced GST rate to the pre-reduction all-inclusive price and compares it with the actual post-reduction base price for each ticket category. The DGAP's Tables A and B apply this method across ticket classes; the Respondent did not dispute the methodology or the figures and failed to produce contemporaneous approvals or cogent evidence (such as authenticated permissions for price increases or quantified cost escalations) to rebut the presumption that the tax benefit should have been passed on. Project-wise treatment analogous to real estate was rejected because cinema ticket sales constitute a continuous supply, not discrete projects.

Conclusion: The Respondent contravened Section 171 and profiteered an amount of Rs. 11,88,482/-, confirmed in full in favour of the Revenue.

Issue (ii): Whether interest and penalty are payable on the profiteered amount and if so from which date.

Analysis: The amendment introducing an interest liability under Rule 133(3)(c) was notified vide Notification No. 31/2019 dated 28.06.2019. Absent express retrospective language, the presumption against retrospectivity applies and the interest provision operates prospectively. Pre-amendment period does not attract the newly introduced interest liability. Penalty under Section 171(3A) came into force after the violation period and thus is not imposable. The amount of interest pro rata for the three days from 28.06.2019 to 30.06.2019 is negligible and discretionary waiver was applied.

Conclusion: No interest is payable for the period prior to 28.06.2019; interest liability arises, if at all, only pro-rata for 28.06.2019 to 30.06.2019 and is waived; no penalty under Section 171(3A) is imposable.

Final Conclusion: The DGAP's computation and methodology for determining profiteering under Section 171 are upheld; the Respondent's contentions are rejected and the profiteered amount of Rs. 11,88,482/- is to be deposited into Consumer Welfare Funds as directed.

Ratio Decidendi: Where a tax rate reduction occurs, the supplier must pass the benefit to consumers by a commensurate reduction in the total price charged (base price plus tax); in the absence of cogent contemporaneous evidence to rebut the presumption, increase or non-reduction of base price resulting in higher all-inclusive prices constitutes profiteering under Section 171 and includes the tax collected on the excess.

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