AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (7) TMI 797
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....of cinematograph films" by not passing on the benefit of reduction in the GST rate on the aforesaid movie admission tickets from 28% to 18% w.e.f. 01.01.2019, vide Notification No. 27/2018-Central tax (Rate) dated 31.12.2018 and instead, increased the base price to maintain the same cum-tax selling price. b) The Applicant alleged that the Respondent had increased the base price from Rs. 390.63/- to Rs. 423.73/- and had maintained the same cum-tax price of Rs. 500/- for his 'Ebony Class' tickets. The Applicant has enclosed copies of tickets dated 08.12.2018 & 02.02.2019 along with his application form (APAF-1 form). c) Accordingly, the DGAP decided to initiate an investigation and collect evidence necessary to determine whether the benefit of reduction in rate of tax had been passed on by the Respondent to the recipients in respect of supply of service by the Respondent. d) The DGAP issued a Notice on 15.05.2019 under Rule 129 of the CGST Rules, 2017 to the Respondent calling upon the Respondent to reply as to whether he admitted that the benefit of reduction in rate of tax had not been passed on to the recipients by way of commensurate reduction in prices and if so, t....
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....pre-GST rate reduction) for the unique category divided by the number of tickets sold during the period for that unique category. The average base price of the tickets was compared with the actual selling price of the tickets similar in each aspect sold during post-GST rate reduction i.e. on or after 01.01.2019 as illustrated 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) 1. Multiplex Name A 'Pacific Bansal Ghaziabad' 2. Unique Category B 'Blockbuster Non-3D EBONY Friday to Sunday Day Show' 3. Total No. of tickets sold C 505 4. Total taxable value (after Discount if any) D 1,97,263/- 5. Average base price without (GST) E=(D/C) 390.62/- 6. GST Rate F 28% 18% 7. Actual Selling price (post rate reduction) (including GST) G=128% of E 500/- 8. Commensurate Selling price (post Rate reduction) (Including GST) H=118% of E 460.93/- 9. Post Reduction Session ID & date I 102688 dated 06.01.2019 10 Total No. of Tickets sold in above Session ID J ....
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....om the recipients, is also included in the aforesaid profiteered amount as the excess price collected from the recipients also included the GST charged on the increased base price. k) The above profiteering amount did not include amount in respect of the Applicant as he had specifically submitted in his APAF-1 form that the complaint was received on his social media platform and he himself was not the recipient of the impugned service in which profiteering had been determined. 2. The above Report of the DGAP dated 31.01.2020 was considered by the erstwhile NAA and it was decided to allow the Respondent and the Applicant to file their consolidated written submissions in respect of the above Report of the DGAP. Notice dated 10.02.2020 was also issued to the Respondent directing him to explain why the above Report furnished by the DGAP should not be accepted and his liability for violation of the provisions of Section 171 of the Act should not be fixed. The Respondent vide his letter dated 28.01.2021 has filed his written submissions against the DGAP's Report dated 31.01.2020 as under:- a) The Applicant has no locus standi to make the application alleging profiteering by the ....
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....t:- a) For the Contention raised by the Respondent that he has abided the provision of Section 171 in passing on to the recipient by way of commensurate reduction in prices the DGAP clarified that he has conducted a thorough investigation in terms of Section 171 on the basis of documents and information submitted by the Respondent and submitted the report dated 31.01.2020 under Rule 129 (6) of the CGST Rules, 2017, wherein it was concluded that Respondent has realised an additional amount i.e. profiteering to the tune of Rs. 54,44,642/-. b) For the contention raised by the Respondent that the price of movie ticket are market driven and are controlled dynamically on certain factor i.e. class of ticket, rating of movie, location, movie type, weekdays/weekends, statutory regulations applicable to such business. The DGAP stated that the above objection raised by the Respondent had been covered in para-14 of its report dated 31.01.2020 which is reproduced below:- "14. Respondent had submitted that he had different ticket prices for the movies depending on the factors namely Category of Movies (Blockbuster & Regular), Movie Type (3D & Non-3D), Ticket type (GOLD & EBONY), Weekdays (....
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....tion in rate of tax to the consumers. Thus, the legal position is unambiguous and could be summed up as follows:- i. A supplier of goods or services must pass on the benefit of ITC or reduction in rate of tax to the recipients by commensurate reduction the prices. ii. The law does not offer a supplier of goods and services any flexibility to suo moto decide on any other modality to pass on the benefit of ITC or reduction in rate of tax to the recipients. Therefore, computation of the gain/loss as per financial statements could not be considered in the light of above statutory provisions. Further, the Respondent had himself admitted in this para that he had to increase his base price from Rs. 390.63/- to Rs. 423.73/- and because of such increase in base price, the price of ticket also got increased. e) For the contention raised by the Respondent that inward price of the cinematographic film was also increased by the distributor in the instant case therefore as the inward price increased the outward supply price also increased during the instant period, the DGAP stated that the Increase in the cost is a factor for determination of price but this factor is independent of the o....
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....upply of goods or services on the prices of the products being supplied. The method adopted by DGAP in this regard was not laid down anywhere and was based on certain assumptions that the amount of tax calculated on the value of tickets for pre-rate reduction period would be the same for post rate reduction period and in case of multiple combination of screening, would be the same for each combination. d) No machinery provision for determining whether there is any profiteering amount:- i. How the cases of profiteering were to be identified and for this purpose, how the increase in base prices due to genuine reasons like increase in the cost of inputs, increase in the demand for the product, etc. was to be distinguished from increase with the objective of pocketing the tax concession; ii. How the impact of reduction in rate of tax on the price of a product was to be calculated; and iii. Once the profiteering was established, how the period of price reduction for which the profiteered amount was to be calculated, was to be determined. e) Every increase in base price cannot be presumed to be on account of profiteering:- In the case of Shri Kumar Gandharv v. KRBL Ltd., 2018....
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.... person shall be liable to pay penalty equivalent to ten percent of the amount so profiteered: PROVIDED that no penalty shall be leviable if the profiteered amount is deposited within thirty days of the date of passing of the Order by the Authority. Explanation:- 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." 7. This Commission further finds that the Central and the State Governments had reduced the rates of GST on "Services by way of admission to exhibition of cinematograph films where the price of admission ticket was above one hundred rupees" from 28% to 18% w.e.f. 01.01.2019, vide Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018, the benefit of which was required to be passed on to the recipients by the Respondent as per the provisions of Section 171 of the above Act. 8. The Commission finds that, one of the contentions of the Respondent was that the Applicant has no locus standi....
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....ind that there is basically one class of tickets in the Respondent's Multiplex, namely, 'Platinum'. Upon perusal of table 'A' of the DGAP's report it is clear that the Respondent did not reduce the selling price commensurately of the movie tickets when the GST rate was reduced from 28% to 18% w.e.f. 01.01.2019, vide Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018 and hence profiteered an amount of Rs. 39.07/- per ticket. Thus the benefit of reduction in GST rate was not passed on to the recipients by way of commensurate reduction in price, in terms of Section 171 of the CGST Act, 2017. 11. The Respondent also contended that he had reduced tax being charged from 28% to 18% w.e.f. 01.01.2019 and that the ticket which was purchased by the Applicant, clearly spelt out the net ticket price as well as GST (CGST as well as SGST) of 18% being charged on the net price. In this regard the Commission finds that as per Section 171 of the Act, benefit of GST rate reduction shall be passed on to the recipient of service by way of commensurate reduction in prices and such reduction can obviously be in monetary terms only, so that the final price payable by a ....
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....inds that the provisions of Section 171 of the CGST, 2017 require a registered person under GST to pass on the benefit of additional ITC or reduction in the rate of tax by way of commensurate reduction in the prices of goods or services supplied by him. Hence, it was the responsibility of the Respondent to comply with the provisions of Section 171 of the CGST Act, 2017. Therefore, the submission of the Respondent was untenable. 15. The Respondent has also averred that every increase in base price cannot be presumed to be on account of profiteering. The Respondent relied upon the case of Shri Kumar Gandharv v. KRBL Ltd., 2018-TIOL-2-NAA-GST, vide which erstwhile NAA held that "an increase in MRP of packed and branded rice on account of an increase in the purchase price of loose rice was justified". In this regard, the Commission holds that the judgment cited by the Respondent is different from the instant case as in the earlier case, the pre-GST rate was nil and for the first time a tax of 5% was imposed on the impugned product after implementation of GST w.e.f. 01.07.2017. Therefore, the above contention of Respondent is not tenable. 16. The Respondent vide his email dated 02.04.....
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....finds that, as per the details and calculations in table 'A' above, the Respondent had been profiteering by way of increasing the base prices of the tickets (Services) and by not reducing the selling price of the tickets (Services) commensurately, despite reduction in GST rate on "Services by way of admission to exhibition of cinematograph films" where price of ticket was one hundred rupees or above, from 28% to 18% w.e.f. 01.01.2019. The base prices of the admission tickets were indeed increased, as a result of which the benefit of reduction in GST rate was not passed on to the recipients by way of commensurate reduction in prices charged. The total amount of profiteering covering the period of 01.01.2019 to 30.04.2019 is Rs. 54,44,642/-. 18. This Commission, based on the facts discussed above, finds that the Respondent had resorted to profiteering by way of either increasing the base price of the service while maintaining the same selling price or by way of not reducing the selling price of the service commensurately, despite a reduction in GST rate, on "Services by way of admission to exhibition of cinematograph films where price of admission ticket was above one hundre....
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.... of the case be consigned after completion. Annexure-A S.No Unique Combinations 1 Blockbuster 3D EBONY Friday to Sunday Day Show 2 Blockbuster 3D EBONY Friday to Sunday Night Show 3 Blockbuster 3D EBONY Monday to Thursday Day Show 4 Blockbuster 3D EBONY Monday to Thursday Night Show 5 Blockbuster 3D GOLD COMPLIMENTARY Friday to Sunday Day Show 6 Blockbuster 3D GOLD COMPLIMENTARY Friday to Sunday Night Show 7 Blockbuster 3D GOLD COMPLIMENTARY Monday to Thursday Day Show 8 Blockbuster 3D GOLD COMPLIMENTARY Monday to Thursday Night Show 9 Blockbuster 3D GOLD Friday to Sunday Day Show 10 Blockbuster 3D GOLD Friday to Sunday Morning Show 11 Blockbuster 3D GOLD Friday to Sunday Night Show 12 Blockbuster 3D GOLD Monday to Thursday Day Show 13 Blockbuster 3D GOLD Monday to Thursday Morning Show 14 Blockbuster Non-3D EBONY Friday to Sunday Morning Show 15 Blockbuster Non-3D EBONY Friday to Sunday Night Show 16 Blockbuster 3D GOLD Monday to Thursday Night Show 17 Blockbuster Non-3D EBONY Friday to Sunday Day Show 18 Blockbuster Non-3D EBONY Monday to Thursday Day Show 19 Blockbuster Non-3D EBONY Monday to Thursday Morning Show 20 Blockbuster Non-3D ....