Profiteering on cinema ticket GST reduction found; benefit not passed, recovery of Rs.2.5 lakh ordered.

Investigation by the Director General of Anti-Profiteering established that a seller did not pass on a statutory GST rate reduction on cinema admission tickets, maintaining the same inclusive price by raising the base price. The seller admitted non-reduction for specified ticket slabs and thereby failed to give effect to commensurate reduction or pass on input tax credit; the conduct amounted to profiteering of Rs. 250,148.39. The investigative report was accepted and the finding mandates recovery of the quantified profiteered amount from the seller.

---

---

Issues: (i) Whether the reduction in GST rate on admission to cinematograph exhibitions was passed on to recipients by way of commensurate reduction in ticket prices and whether profiteering under Section 171 CGST Act, 2017 stood established; (ii) If profiteering is established, the quantum of profiteered amount and the remedial directions to be issued.

Issue (i): Whether the respondent failed to pass on the benefit of reduction in GST rate on specified admission services and thereby profiteered under Section 171 of the Central Goods and Services Tax Act, 2017.

Analysis: Price data for pre- and post-rate-reduction periods for ticket categories (MRP Rs. 80, Rs. 60 and Rs. 30) and submitted documents were considered; respondent's written confirmation of non-reduction for those slabs was relied upon as admission; calculations comparing expected post-rate-reduction cum-tax prices with actual charged prices show maintenance of pre-reduction cum-tax prices by increasing base price.

Conclusion: The respondent did not pass on the benefit of the GST rate reduction and profiteering under Section 171 CGST Act, 2017 is established.

Issue (ii): What is the amount of profiteering and what directions should be issued for its recovery and utilisation.

Analysis: DGAP's computed profiteered amount for the investigation period (01.01.2019 to 30.09.2019) was examined and accepted; calculations result in a quantified profiteering figure; interest and allocation to Consumer Welfare Funds were considered as appropriate remedial measures under the statutory scheme.

Conclusion: Profiteered amount quantified at Rs. 2,50,148.39; respondent directed to deposit 50% of the amount with interest at 18% p.a. into the Centre's Consumer Welfare Fund and 50% with interest into the State of Telangana Consumer Welfare Fund (or into Centre's Fund if State Fund is not constituted) within one month.

Final Conclusion: The DGAP report is accepted, profiteering under Section 171 CGST Act, 2017 is established for the specified period and the quantified amount with interest is directed to be deposited into designated Consumer Welfare Fund(s), resulting in a decision favourable to the revenue authority.

Ratio Decidendi: Where a statutory reduction in GST rate occurs, the benefit must be passed to recipients by commensurate reduction in prices; failure to do so, including maintenance of pre-reduction cum-tax prices by inflating base prices, constitutes profiteering under Section 171 CGST Act, 2017.

---