TaxTMI 
TaxTMI 
2020 (9) TMI 497
X X X X Extracts X X X X
X X X X Extracts X X X X
....18% w.e.f. 01.01.2019. In the said application it was alleged by the Applicant No. 1 that the Respondent was selling the movie tickets of value of Rs. 250/-, Rs. 200/- and Rs. 150/- at the same prices after the reduction in the rate of GST from 28% to 18%, vide Notification No. 27/2018- Central Tax (Rate) dated 31.12.2018 and instead had increased the base prices resulting in non passing on of the benefit of rate reduction to his customers. Copy of the APAF-I Form, letter dated 22.02.2019 and 22.03.2019 of the Respondent addressed to the Pr. Chief Controller of Accounts, CBIC, New Delhi had also been enclosed by the Applicant No. 1 with his complaint. 2. The DGAP has stated in his Report that the Standing Committee on Anti-profiteering has examined the above application and on being prima facie satisfied, had referred it to the DGAP to conduct a detailed investigation. On receipt of the aforesaid reference from the Standing Committee on Anti-profiteering on 05.08.2019, a notice under Rule 129 (3) of the above Rules was issued by the DGAP on 14.08.2019 calling upon the Respondent to respond as to whether he admitted that he had not passed on the benefit of reduction in GST rate w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mer Welfare Funds (CWFs). (d) He had three properties in the state of Telangana namely Hyderabad GSM Mall (having 8 Screens), Hyderabad GVK One (having 6 Screens) and Hyderabad MP (having 5 Screens). Further, Hyderabad GSM Mall theatre had started functioning in the month of June, 2019 and the first movie was exhibited on 29.06.2019 and the prices of tickets in Hyderabad GSM Mall theatre were fixed in terms of the order dated 14.06.2019 passed by Hon'ble High Court of Telangana in WP No. 11805 of 2019 5. The Respondent, vide the afore-mentioned e-mails/letters has also furnished the following documents/information before the DGAP:- a. Copies of GSTR-I & 3B Returns for the period from December, 2018 to July, 2019. b. Movie wise & ticket wise data for the period from December, 2018 to July, 2019. c. Sample copies of tickets pre and post 01/01/2019. d. Government Order No. 43 dated 15.10.2009 & G. O. No. 169 dated 09.10.2012 approving the ticket prices. e. Copies of representations made before the Principal Secretary (Home), Government of Telangana & Licensing Authority, Commissioner of Police, Hyderabad. f. Copies ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....und to maintain the base prices of the tickets across all classes of seats/slots and GST should have been charged on the pre rate reduction base prices. 10. The DGAP has further stated that the Respondent was dealing in two classes of admission/movie tickets i.e. 'Executive' and 'Royal'. For the purpose of determination of profiteering, the class wise number of tickets sold during the period from 01.12.2018 to 31.12.2018 (pre-GST rate reduction) were taken and an average base price (after discount) was obtained by dividing the total taxable value by total number of tickets sold during this period. The average base prices of the ticket were compared with the actual selling price of the tickets sold during post-GST rate reduction i.e. on or after 01.01.2019. The DGAP has furnished the illustration of the methodology adopted while computing profiteering, in the Table-'A' below:- Table-'A' (Amount in Rupees) Sl. No. Description Factors Pre Rate Reduction (01.12.2018 to 31.12.2018) Post Rate Reduction (From 01.01.2019) Pre Rate Reduction (01.12.2018 to 31.12.2018) Post Rate Reduction (From 01.01.2019) 1. Multiplex Name ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1.01.2019 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 1. Class of Tickets A Executive (2D) Executive (3D) 2. Ticket MRP B 150/- 150/- 138/- 200/- 200/- 184/- 3. Total No. of tickets sold C 56,230 12,785 4,59,297 33,272 1,167 71,218 4. Total taxable value (after Discount, if any) D 65,89,031 16,25,229 5,37,10,191 51,98,417 1,97,783 1,11,05,324 5. Average base price (without GST) E=D/C 117.18/- 127.12/- 116.94/- 156.24/- 169.48/- 155.93/- 6. GST Rate F 28% 18% 18% 28% 18% 18% 7. Actual Selling price (post rate reduction) (including GST) G=E* (1+F) 150/- 150/- 138/- 200/- 200/- 184/- 8. Commensurate Selling price (post Rate reduction) (including GST) H=118 % of E 138.27/- 138.27/- 184.36/- 184.36/- 9. Excess amount charged or Profiteering per Ticket I=G-H 11.73/- - 15.64/- - 10. Total ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ase price (without GST) E=D/C 195.30/- 211.86/- 194.92/- 218.74/- 237.28/- 218.64/- 6. GST Rate F 28% 18% 18% 28% 18% 18% 7. Actual Selling price (post rate reduction) (including GST) G=E* (1+F) 250/- 250/- 230/- 280/- 280/- 258/- 8. Commensurate Selling price (post Rate reduction) (including GST) H=118 % of E 230.45/- 230.45/- 258.12/- 258.12/- 9. Excess amount charged or Profiteering per Ticket I=G-H 19.55/- - 21.88/- - 10. Total J=C*I 29,521 - 5,426 - 11. Total Profiteering (Hyderabad GVK One Royal) (K) Rs. 34,947/- 12. The DGAP has further claimed that as per the Table 'B', 'C' & 'D', it was clear that the Respondent had increased the base prices during the period from 01.01.2019 to 06.01.2019 to maintain the same selling prices (or MRPs), resulting in extra charging from the customers for the tickets, which they were paying prior to reduction in the rate of tax from 28% to 18% w.e.f. 01.01.2019 and hence he has denied the benefit of reduction in the rate of tax to his recipients. Howeve....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Rohit Jain and Sh. Adarsh Somani, Advocates represented the Respondent. Vide his submissions dated 27.02.2020 the Respondent has submitted:- a. That pursuant to the change in the GST rate, he had reduced the prices by giving effect to the lower rate of GST in all the states, where the prices were not regulated. He had also enclosed the sample tickets (pre and post rate change) showing the reduced prices which was also acknowledged by the DGAP. b. That in terms of Section 171 of the CGST Act, 2017, he had reduced his ticket prices from effective date of the Notification to give effect to the legal provisions as might be applicable and the said reduction in the prices was also carried as a news item by several constituents of the print media. c. That in the State of Telengana, the ticket prices that could be charged from the patrons were regulated by the local enactments and hence, he had no say in the prices that could be charged d. That to address/clarify on the issue of profiteering, he had made a representation before the Principal Secretary (Home), Govt. of Telengana and enclosed a copy of the same. e. That on reduction of the rate ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... He has compared the average pre rate reduction base prices of the tickets with the actual selling prices 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. 11.73 and Rs. 21.88 respectively has been computed on the 'Executive' and 'Royal' 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 buyers 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 profi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nce both the above benefits are being given by the above Governments out of their tax revenue. It also provides that the above benefits are to be passed on any supply i.e. on each Stock Keeping Unit (SKU) of each product or unit of construction or service to every buyer and in case they are not passed on, the quantum of denial of these benefits or the profiteered amount has to be computed for which investigation has to be conducted in respect of all 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rvice 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 clarifications were required to be issued to the Respondent for passing on the benefit of tax reduction. The Respondent was only required to reduce selling prices of the tickets by taking in to account the reduction in the tax rate w.e.f. 01.01.2019 which he has failed to do till 06.01.2019. Therefore, the above contention of the Respondent....