TaxTMI 
TaxTMI 
2021 (5) TMI 934
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....the rate of GST from 18% to 12% w.e.f. 1-1-2019. Along with the application, Applicant No. 1 had also submitted the APAF-1 Form, copies of cinema tickets issued in the pre and post rate reduction period, and the details of the GST paid. 2. Vide his above Report, the DGAP has reported that Applicant No. 1 had alleged that the Respondent has not passed on the benefit of reduction in the GST rate on "Services by way of admission to exhibition of cinematograph films where price of admission ticket was one hundred rupees or less" from 18% to 12% which came into effect on 1-1-2019 vide Notification No. 27/2018-Central Tax (Rate), dated 31-12-2018 and that the Respondent had instead increased the base price of the tickets. Along with the application, the Standing Committee has also forwarded the Annexure to APAF-1 confirming the fact of an increase in the base prices of the tickets and letter dated 31-12-2018 and 13-2-2019 of the Respondent to the State Standing Committee on Anti-Profiteering. 3. The DGAP has stated that on receipt of the aforesaid reference from the Standing Committee on Anti-profiteering, a notice under Rule 129 of the Rules was issued on 9-7-2019 callin....
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.... the Table below :- Class Dated 1-12-2018 to 31-12-2018 Total Basic + Tax Dated 1-1-2019 to 10-3-2019 Total Basic + Tax Dated 11-3-2019 to 8-5-2019 Total Basic + Tax Dated 9-5-2019 Onwards Total Basic + Tax Tax Basic Tax Basic Tax Basic Tax Basic GST Rate GST Rate GST Rate GST Rate 18% Rs. Rs. 12% Rs. Rs. 12% Rs. Rs. 12% Rs. Rs. Upper & Lower Balcony 18 100 118 12 100 112 12 100 112 12 100 112 First Class 12.20 67.80 80 8.57 71.43 80 8.03 66.97 75 8.57 71.43 80 Second Class 7.63 42.37 50 5.35 44.65 50 4.82 40.18 45 5.35 44.65 50 5. The Respondent, vide the afore-mentioned e-mails/letters, also furnished the following documents/information before the DGAP :- (a) Invoice-wise details of all outward taxable supplies of the movie admission tickets impacted by GST rate reduction w.e.f. 1-1-2019, during the period 1-12-2018 to 30-6-2019. (b) Price List of the af....
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....ch that the final price payable by a consumer got reduced commensurate with the reduction in the tax rate. This was the legally prescribed mechanism for passing on the benefit of ITC or reduction in the rate of tax to the recipients under the GST regime and there was no other method to pass on such benefits. From 1-1-2019, the Respondent, in terms of Section 171 of the CGST Act, 2017, was bound to maintain the base prices of the tickets across all class of seats/slots and GST should have been charged on the pre rate reduction base prices. 10. The DGAP has reported that after examination of the details of sales data, letter of the Applicant No. 1, and the replies submitted by the Respondent it was observed that there were three categories of tickets i.e. Upper and Lower Balcony-Rs. 118/-, First Class-Rs. 80/- and Second Class-Rs. 50/- sold by the Respondent during the pre-rate reduction period effective from 1-12-2018 to 31-12-2018. With effect from 1-1-2019, the price of the Upper and Lower Balcony tickets was reduced to Rs. 112/-, whereas the prices of the First Class and Second Class tickets were kept unchanged at Rs. 80/- and Rs. 50/- respectively. 11. The DGAP h....
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....8-5-2019 has been excluded from the final calculation of the amount of profiteering by the DGAP and details of the same has been furnished by the DGAP in the Table-B mentioned below :- TABLE B Class Dated 1-12-2018 to 31-12-2018 Total Basic + Tax Dated 1-1-2019 to 10-3-2019 Total Basic + Tax Dated 11-3-2019 to 8-5-2019 Total Basic + Tax Dated 9-5-2019 Onwards Total Basic + Tax Increase/ decrease in the base price of the ticket* Tax Basic Tax Basic Tax Basic Tax Basic GST Rate GST Rate GST Rata GST Rate 18% Rs. Rs. 12% Rs. Rs. 12% Rs. Rs. 12% Rs. Rs. Upper & Lower Balcony 18 100 118 12 100 112 12 100 112 12 100 112 0 First Class 12.20 67.80 80 8.57 71.43 80 8.03 66.97 75 8.57 71.43 80 -0.83 Second Class 7.63 42.37 50 5.35 44.65 50 4.82 40.18 45 5.35 44.65 50 -2.19 14. The DGAP has claimed that as per the above Table, it could be concluded that there was no profiteering on the tickets of Rs. 75/- and Rs. 45/....
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....om the table above, it was quite clear that the base prices of the admission tickets had been indeed increased, as a result of which the benefit of reduction in GST rate from 18% to 12% (w.e.f. 1-1-2019), was not passed on to the recipients by way of commensurate reduction in prices charged (including lower GST @ 18% & 12%). Thus, the Respondent has contravened the provisions of Section 171 of the CGST Act, 2017. The total amount of profiteering covering the period from 1-1-2019 to 30-6-2019, was Rs. 1,29,243/- (Rupees One Lakh, Twenty-Nine Thousand, Two Hundred and forty-three only). The DGAP has also stated that the recipients of the services were not identifiable as no such details of the consumers had been provided by the Respondent. Based on the details of outward supplies of the tickets (Services) submitted by the Respondent, it was observed that he had sold admission tickets in the State of Telangana only. 17. The investigation report was received by this Authority on 27-12-2019 and it was decided to accord an opportunity of hearing to the Applicants and the Respondent on 20-1-2020. Notice dated 1-1-2020 was also issued to the Respondent directing him to explain why ....
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....hould be dropped, otherwise, profiteering should be recomputed. (j) That were there any guidelines to follow on pricing changes during the tax rate changes. (k) That he had not contravened the provisions of Section 171 of the CGST Act, 2017 and he had charged and collected the correct tax rate from his customers before and after the change in the tax rate. (l) That he had bought the movie screening rights at a higher rate from the producer/distributor and hence he had not profiteered; that no benefit had accrued to him which ought to have been passed on by him to the customers. (m) That he had the right to change his ticket prices after the passage of several months from the date of the tax rate reduction that took effect on 1-1-2019. 18. Supplementary Report was also called from the DGAP on the above submissions of the Respondent under Rule 133(2A) of the CGST Act, 2017. The DGAP vide his report dated 26-2-2020 has submitted his clarifications and has stated :- (a) That the legality of the investigation conduct....
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.... tickets post rate reduction. (d) That as per the data supplied by the Respondent during the investigation and scrutiny of the outward taxable supplies of the movie tickets during the period from 1-12-2018 to 30-6-2019 impacted by the GST rate reduction w.e.f. 1-1-2019, it has been observed that the prices of the movie tickets were not categorized/rated as per the factors mentioned such as new/old movie, age of the movie, performance of the movie, and show timings by the Respondent in his submission. On the contrary, it has been noticed that the prices of the movie tickets remained more or less uniform post-tax rate reduction and were not dynamically changed as stated by the Respondent. Also, any documentary evidence to establish the Respondent's contention has not been submitted by him so far. (e) That the Respondent as per his submissions has informed that the theatre owner has no independent right to fix the prices of the admission tickets and that the State Government has provided them with a range of ticket prices within which the theatre owners could fix the prices based on certain factors/attributes of the movie. In....
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.... as such increase affected by various commercial factors could not have happened overnight to coincide with the tax rate reduction. 19. In response to the above submissions of the DGAP dated 26-2-2020, the Respondent vide e-mail dated 18-6-2020 has stated that :- (a) In a cinema hall, if two movies got exhibited, both were different products. They had different star cast, different teams, different producers, and therefore were priced differently. Therefore, the anti-profiteering proceedings under Section 171 of the CGST Act, 2017 should be restricted to the old movie. In the present case, the profiteering has been calculated until June, 2019, which was wholly unsustainable. (b) The change in the rate of tax was done on 1-1-2019 and during this time, he was exhibiting the movie "Anthariksham". However, on 11-1-2019, a new movie "Vinaya Vidhaya Rama" was exhibited. Hence, the new movie was a whole new product and the pricing of this movie was his prerogative. The new movie was a new product and hence the movie tickets for the same could not be forced to be sold at older prices. (c) &n....
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..... - For the purpose of this section, the expression "profiteered" shall mean the amount determined on account of not passing the benefit of reduction in rate of tax on supply of goods or services or both or the benefit of input tax credit to the recipient by way of commensurate reduction in the price of the goods or services of both." 22. One of the contentions of the Respondent is that from the date when the tax rate was reduced, he had charged the reduced rate of tax from his customers. In this regard, it is pertinent to mention that as per the investigation carried out by the DGAP, while this contention of the Respondent was found correct, it has also been found that the Respondent has charged the reduced rate of tax on the increased base price in respect of the First Class and Second Class movie tickets. Hence the effective final prices of the tickets required to be paid by the customers had remained unchanged despite the tax rate reduction, thus nullifying the impact of tax rate reduction for the customers. Therefore, the benefit of tax rate reduction to be passed on to the customers/recipients was not passed on as per the provisions of Section 171 of the CGST Act, 201....
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....has provided him with a range of ticket prices within which he could fix the prices based on certain factors of the movie. Further, the Respondent has neither submitted the order showing fixation of prices by the State Government not submitted any agreement to evidence that the price of the movie tickets was fixed by the film producers/distributors. Hence, the above two statements made by the Respondent are not correct. Therefore, the said contention made by the Respondent cannot be accepted. 26. The Respondent has also contended that two different movies exhibited in the cinema hall should be considered as two different products as they have different star cast, different teams, different producers, etc. and therefore, he had the right to price them differently. A new movie was a whole new product and the same could not be forced to be sold at the older rates of earlier movies. In this connection, we opine that notwithstanding this contention of the Respondent, since the nature of service supplied by the Respondent is the same, different movies can't be treated as different products as long as the cinema hall is the same and the impact of rate reductions would be applicabl....
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....s that there is no profiteering on the tickets of Rs. 75/- and Rs. 45/- during the period 11-3-2019 to 8-5-2019, and the same has not been taken into account." 28. The data/input contained in the above para has been verified by the DGAP. It is a fact that the price of two categories i.e. the First and the Second class movie tickets has been reduced commensurately by the Respondent w.e.f. 11-3-2019. Since he has complied with the provisions of Section 171 of the CGST Act, 2017, the period from 11-3-2019 has no relevance from the perspective of Section 171 of the CGST Act, 2017, and hence, no profiteering can be established for the period after 11-3-2019. While taking this view, we take into cognizance of the fact that this Authority is not a price regulator. Thus, in this case, since the Respondent has increased the price of the movie tickets of the First and the Second class categories only in the month of May, 2019, this price increase cannot be correlated to provisions of Section 171 of the CGST Act, 2017. It is also a fact that the DGAP has reported that in the post-tax-rate reduction period, the Respondent has maintained the same base prices in respect of the Upper and ....