TaxTMI 
TaxTMI 
2020 (8) TMI 772
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....ndent in respect of supply of "Services by way of admission to exhibition of cinematograph films" despite reduction in the rate of GST from 28% to 18% w.e.f. 01.01.2019. The Applicant No. 1 had alleged that the Respondent had sold tickets of value of Rs. 250/-, Rs. 200/- Rs. 150/- at the same prices prior to and after the GST rate reduction vide Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018. The Applicant No. 1 had also alleged that the Respondent had not passed on the benefit of reduction in the GST rate from 28% to 18% w.e.f. 01.01.2019 announced vide Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018 and instead. Had increased the base prices. The above Applicant had also enclosed the following supporting documents along with his application:- a. Copy of the APAF-I. b. Sample tickets dated 31.12.2018 (Pre-rate reduction) and 06.01.2019 & 07.01.2019 (Post-rate reduction). c. Letter dated 25.02.2019 of the Respondent addressed to Pr. Chief Controller of Accounts, CBIC, New Delhi along with copy of cheque No. 349950 dated 22.02.2019 for payment of Rs. 13,72,181/- into the Consumer Welfare Fund (CWF). 2. The DGAP has reported th....
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....iven effect to the reduced GST rates on his ticket prices w.e.f. 07.01.2019 and the differential amount of Rs. 13,72,181/- was voluntarily deposited in the CWF. Therefore. The Respondent had exercised all due diligence, within his control. To ensure that the GST rate reduction benefit was appropriately passed on to his customers. d) That he has 8 cinema properties [having total 49 No. of screens viz. 30 (2D), 18 (3D) & 1 (4DX)] in the State of Telangana out of which PVR Erramanzil. Hyderabad had started its operation from 30.11.2019 and the 4DX screen was in operation from 11.02.2019. In terms of Telangana State Regulations, approval from the Licensing Authority was generally given for an introductory ticket of Rs. 75/-. After a month of operations, permission was granted to increase the ticket prices. Further, the prices applicable in this property were fixed in terms of the order dated 02.01.2019 passed by the Hon'ble High Court of Telangana in WP No. 48127 of 2018 filed on 31.12.2018. e) That the PVR Musarambagh Hyderabad (having 6 screens) has started its operation from 22.03.2019 and pricing in this property was fixed in terms of the order dated 01.04.2019 pa....
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....eduction in the rates of tax, it was important to examine the provisions of Section 171 (1) of the CGST Act. 2017, to ascertain whether the present case was a case of profiteering or not. Section 171 (1) reads as "Any reduction in rate of tax on any supply of goods or services or the benefit of ITC should be passed on to the recipient by way of commensurate reduction in prices." Thus, the legal requirement was abundantly clear that in the event of a benefit of Input Tax Credit (ITC) or reduction in the rate of tax, there must be a commensurate reduction in the prices of the goods or services. Such reduction should obviously be in monetary terms only so that the final price payable by a consumer got reduced which was the legally prescribed mechanism for passing on the benefit of ITC or reduction in rate of tax to the customers under the GST regime. Moreover, it was also clear that the said Section 171 simply did not provide a supplier of goods or services any other means of passing on the benefit of ITC or reduction in the rate of tax to the buyers. 7. The DGAP has also noted that there were basically two classes of tickets in the Respondent's Multiplexes, namely, 'Classic' and '....
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....te reduction in the prices, in terms of Section 171 of the CGST Act, 2017. On the basis of the calculation as illustrated in Table-A' above, profiteering in case of all the tickets sold by the Respondent (Except PVR Musarambagh, Hyderabad, as the property came into existence only in March 2019 and price was fixed for the first time as per the Hon'ble Telangana High Court Order dated 01.04.2019) has also been arrived at in a similar way for all the Multiplexes which has been furnished in Table-B' below:- Table-'B' (Amount in Rs.) Sl.No. Description Factor Pre-Rate Reduction (01.12.2018 to 31.12.2018 Post rate Reduction (01.01.2019 to 06.01.2019) Post-Rate Reduction 07.01.2019 to 31.07.2019 Pre-Rate Reduction (01.12.2018 to 31.12.2018 Post rate Reduction (01.01.2019 to 06.01.2019) Post-Rate Reduction 07.01.2019 to 31.07.2019 Pre-Rate Reduction (01.12.2018 to 31.12.2018 Post-Rate Reduction 07.01.2019 to 31.07.2019 1. Classic of Ticket A Classic Recline Classic 2. Ticket MRP B 150/- 150/- 138/- 250/- 250/- 230/- 75/- 75/- 3. Total No. of tickets sold C 5,54,001 1,02,323 40,03,644....
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....has been supplied by the Respondent in the State of Telangana on the basis of the details of outward supplies of the services by way of admission to exhibition of cinematograph films, submitted by him. 11. Consequently. the DGAP has submitted that the allegation of profiteering by way of either increasing the base prices of the services while maintaining the same selling prices or by way of not reducing the selling prices commensurately on the "Services by way of admission to exhibition of cinematograph films where price of admission ticket was above one hundred rupees" when the GST rate was reduced from 28% to 18% and Services by way of admission to exhibition of cinematograph films where price of admission ticket was one hundred rupees or less'' when the rate of GST was reduced from 18% to 12% w.e.f. 01.01.2019 stood confirmed against the Respondent. On this account, the Respondent had realized an additional amount to the tune of Rs. 13,51.519/- from the recipients which included both the profiteered amount and the GST on the said profiteered amount. However, as mentioned in para supra, the Respondent had voluntarily deposited Rs. 13,72,181/- along with interest of Rs. 35,8651....
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.... prices during the period w.e.f. 01.01.2019 to 06.01.2019 and had requested to deposit the profiteered amount. Consequently. the Respondent had voluntarily deposited Rs. 13,72,181/- along with interest of Rs. 35,865/- under protest. 16. The Respondent has further stated that he was issued a notice by the DGAP bearing F. No. 22011/API/125/2019 dated 22.08.2019 and notice No. 22011/API/125/2019/3021 dated 04.12.2019 seeking information/documents relating to the contravention of the provisions of Section 171 of the CGST Act, 2017. The Respondent has submitted that he had filed his replies with the DGAP dated 06.09.2019 and 26.12.2019 explaining the facts of the case along with his submission that he has suo moto passed on the benefit on account of rate reductions even though there was no clarity on this issue in the regulated market. 17. The Respondent has also submitted that he was registered in the State of Telangana under GSTIN 36AAACP4526DIZR and was majorly engaged in the following business segments: - a. Sale of Tickets b. Sale of Food & Beverages c. Sale of Advertisement space 18. The Respondent has also submitted that effective from 01.01.20....
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....gorised as Entry 33 in the State List of Seventh Schedule of the Constitution of India. Therefore, the business of multiplexes was a State Subject. The Constitution 101st Amendment Act, 2016 by way of which the GST has been implemented, has not changed the status of Entry 33 thereof. Accordingly, the multiplexes in the State of Telangana have continued to be governed by the special statute enacted by a particular State. In the present case the Andhra Pradesh Cinemas (Regulation) Act, 1955 and the Rules made thereunder were regulating the regime of static/standardization of admission ticket prices. The concerned Licensing Authorities in the State of Telangana were fixing the admission ticket prices and endorsing the same on the license itself. Any deviation thereto in the admission ticket prices required the previous sanction of the concerned Licensing Authority. 22. The Respondent has also claimed that in the present case, the Respondent was also granted license by the Licensing Authority whereupon the admission ticket prices were fixed. A copy of the license/permission granted to the PVR Panjagutta by the Licensing Authority was enclosed as evidence wherein the admission ticket....
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....market. He has further contended that an order was passed by the Hon'ble High Court of Telangana in WP No. 18779 of 2019 dated 31.10.2016, wherein, the Hon'ble High Court had allowed the cinema theatres to run as per the rates informed to the Licensing Authorities and collect the prices deemed appropriate by the theatre owners post informing the Licensing Authorities. Accordingly, the MAI had submitted a representation to the Principal Secretary (Home) dated 04.01.2019 for seeking clarification on changing the ticket prices on account of increase in the cost but no response was received from the office of the Principal Secretary. 26. The Respondent has also averred that the cinema theatres were not allowed to change ticket prices even on account of increase in the cost without permission of the concerned authorities. In the present case, even when the cost had increased in the past, the Respondent had not approached the Licensing Authority for revising the ticket prices. The Respondent has also argued that he had infact passed on the benefit of GST rate reductions to his customers and therefore. there was no need for further reduction of ticket prices. He has also stated that ev....
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....ons in the Telangana State Regulations, The Licensing Authority might have provided an introductory ticket price of Rs. 75/- but this did not absolve the Respondent from Section 171 of the CGST Act, 2017. 30. The DGAP has further submitted that the case of Kumar Gandharv v. KRBL Ltd. 67 GST 574 (NAA) = 2018 (5) TMI 760 - NATIONAL ANTI-PROFITEERING AUTHORITY by the Respondent was different from the instant case as in the above case the pre-GST rate was nil and for the first time a tax rate of 5% was imposed on the impugned product, therefore the same was not applicable in the present circumstances. 31.The DGAP has also claimed that the Respondent has submitted that there were no guidelines/instructions provided by the Licensing Authority on applicability of the change in the rates of GST in the regulated market. In this regard, the DGAP has stated that the rates prescribed by the State Government were maximum rates and the Respondent was free to charge any rate upto maximum rates allowed by the Government. Further the Respondent being registered under CGST Act, 2017 has to comply with the provisions of Section 171 of the CGST Act, 2017 and pass on the benefit of reductions in ....
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.... of the tickets sold during the post reduction period i.e. after 01.01.2019 and assessed the profiteered amount on each class of ticket as is evident from the perusal of Table-'A' supra where profiteering of Rs. 11.72 and Rs. 19.53 respectively has been computed on the Classic' and 'Recline' classes of tickets. The mathematical methodology employed by the DGAP to compute the profiteered amount is correct, appropriate, reasonable and in consonance with the provisions of Section 171 (1) as the Respondent was selling tickets at various prices to his customers due to which the actual transaction value was required to be taken in to account to calculate the profiteered amount. The average base price computed by the DGAP was required to be compared with the actual base price of the ticket to ascertain whether the Respondent has passed on the benefit to each of his buyer or not. Therefore, it would not have been correct to compare the average base prices pre and post rate reductions. Hence, the mathematical methodology applied by the DGAP to compute the profiteered amount is justified and can be relied upon. 35. It is also revealed from the perusal of Table-'B' supra that after compari....
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.... such SKUs/units/services by the DGAP. What would be the 'profiteered amount' has been clearly defined in the explanation attached to Section 171. These benefits can also not be passed on at the entity/organisation/branch/invoice/product/ business vertical level as they have to be passed on to each and every buyer at each SKU/unit/service level by treating them equally. The above provision also mentions "any supply which connotes each taxable supply made to each recipient thereby making it evident that a supplier cannot claim that he has passed on more benefit to one customer on a particular product therefore he would pass less or no benefit to another customer than what is actually due to that customer. on another product. Each customer is entitled to receive the benefit of tax reduction or ITC on each SKU or unit or service purchased by him subject to his eligibility. The term "commensurate mentioned in the above Sub-Section provides the extent of benefit to be passed on by way of reduction in the price which has to be computed in respect of each SKU or unit or service based on the price and the rate of tax reduction or the additional ITC which has become available to a registere....
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....owered to 'determine' Methodology & Procedure and not to 'prescribe' it. Similarly, the facts of the cases relating to the sectors of Fast Moving Consumer Goods (FMCG), restaurant service, construction service and cinema service are completely different from each other and therefore, the mathematical methodology adopted in the case of one sector cannot be applied to the other sector. Moreover, both the above benefits are being given by the Central as well as the State Governments as a special concession out of their tax revenue in the public interest and hence the suppliers are not required to pay even a single penny from their own pocket and therefore, they are bound to pass on the above benefits as per the provisions of Section 171 (1) which are abundantly clear, unambiguous, mandatory and legally enforceable. The above provisions also reflect that the true intent behind the above provisions, made by the Central and the State legislatures in their respective GST Acts, is to pass on the above benefits to the common buyers who bear the burden of tax. Therefore, no guidelines or methodology or clarifications were required to be issued for passing on the benefit of tax reductions. Th....
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.... provisions of Andhra Pradesh Cinemas (Regulation) Act, 1955. Moreover, the State authorities always fix the upper price limits of the cinema tickets by taking into consideration the various factors including cost in the interest of cinema goers and the Respondent is always at liberty to reduce his prices in accordance with the provisions of Section 171 of the CGST Act, 2017 at the time of rate reductions. Therefore, the above claim of the Respondent is not tenable. 39. The Respondent has also contended that the cinemas and theatres have been mentioned against Entry 33 of the State List of Seventh Schedule of the Constitution of India and therefore, the business of multiplexes was a State subject which has not been affected by the 101st Amendment of the Constitution Act, 2016 by way of which the GST has been implemented and hence prior approval for fixing the prices of the tickets was required under the Andhra Pradesh Cinemas (Regulation) Act, 1955. In this regard it would be relevant to mention that passing on of the benefit of GST is regulated under the CGST/SGST Act, 2017 and not under the 1955 Act and hence, no prior approval of the State Government under this Act is r....
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.... the facts of the present case as in the above case the pre-GST rate was nil and for the first time tax g 5% was imposed on the impugned product. Hence, the provisions of Section 171 (1) were not attracted in the above case as the rate of tax had been increased whereas the same are duly applicable as the rates of tax have been reduced in the present case. 43. Based on the above facts the profiteered amount is determined as Rs. 13,51,519/- for the period from 01.01.2019 to 06.01.2019 as mentioned in Table-B of the DGAP's Report dated 31.01.2020 as per the provisions of Section 171 (1) read with Rule 133 (1) of the CGST Rules, 2017. The Respondent has reduced his prices commensurately w.e.f. 07.01.2019 in terms of Rule 133 (3) (a) of the above Rules therefore, no further direction is required to be passed on this account. Further, since the recipients of the benefit, as determined above are not identifiable, the Respondent has voluntarily deposited an amount of Rs. 13,72,181/-along with interest of Rs. 35,865/- in the CWFs in accordance with the provisions of Rule 133 (3) (c) of the CGST Rules, 2017. 44. Based on the above facts it is clear that the Respondent has contravened t....