TaxTMI 
TaxTMI 
2024 (7) TMI 797
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....ly of "Services by way of admission to exhibition 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....
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....combination of the above factors' by taking the total collection during the period 01.12.2018 to 31.12.2018 (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 re....
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....ion of the various factors' sold during the period 01.12.2018 to 31.12.2018 with the actual prices of the tickets similar in each aspect (Irrespective of the name of Movie screened) sold during the period 01.01.2019 to 30.04.2019. The excess GST so collected from 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 Se....
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....ent passed by erstwhile NAA in the matter of M/s. Sattva Developers Pvt Ltd. case No 71/2020 dated 05.11.2020. 3. A supplementary Report was sought from the DGAP on the above submissions of the Respondent under Rule 133 (2A) of the Rules. The DGAP filed his clarifications vide letter dated 24.05.2022, wherein, it was stated that:- 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....
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....so that the final price payable by a consumer gets reduced. This is the legally prescribed mechanism for passing on the benefit of ITC or reduction in rate of tax under the GST regime to the consumers. Moreover, it is clear that the said Section 171 simply does not provide a supplier of the goods or services any other means of passing on the benefit of ITC or reduction 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 increas....
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....as paid to them. c) No machinery provision for determining the impact of benefit of reduction in rate of tax on supply of goods or services:- that no machinery provision or computational provision either in the Act or in the rules made there under or in the 'Procedure and Methodology' notified by this Authority under Rule 126 to determine the impact of benefit of reduction in rate of tax on any supply 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 objec....
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.... the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him. (3). The Authority referred to in sub-section (2) shall exercise such powers and discharge such functions as may be prescribed. (3A) Where the Authority referred to in sub-section (2) after holding examination as required under the said sub-section comes to the conclusion that any registered person has profiteered under sub-section (1), such 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 ....
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....d by the Respondent and submitted its report dated 31.01.2020 under Rule 129 (6) of the CGST Rules, 2017, wherein it was concluded by the DGAP that Respondent has realised an additional amount i.e. profiteering to the tune of Rs. 10. The Respondent also averred that the price of movie tickets are market driven and are controlled dynamically on certain factors i.e. class of ticket, rating of movie, location, movie type, weekdays/weekends, statutory regulations applicable to such business. In this regard, the Commission find 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 ....
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....bination of the above factors' in each aspect. The details of the computation of the profiteering amount based on the above factors for various combinations of movie tickets sold by the Respondent is given in Annexure-'A' attached with this order. 14. That Respondent contended that the calculation of profiteered amount did not take into account the fact that the prices charged in respect of tickets included cost of distributors which varied from 25% to 70% and which was paid to them. In this regard, the Commission finds 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 e....
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....sment or reassessment of the duties and other levies. They cannot transgress such boundary and proceed to initiate recovery in violation of Sections 14 or 33 (5) of the IBC." In view of the aforesaid settled position of law and the moratorium under Section 14 of IBC, 2016 imposed by the NCLT, the Commission finds that there is no bar on initiating proceedings or proceeding to assess the amount payable by the Respondent for violation of Section 171 (1), CGST Act, 2017. However, the proceedings to recover any amount from the Respondent cannot be initiated. 17. Therefore, the Commission 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 recipient....
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....d committed the above violation. Hence, the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively for the said period. 21. As the case is under insolvency proceedings under IBC, the Commission directs the DGAP to file its claim in the matter for necessary recovery and realization. 22. Further, the Commission, as per Rule 136 of the CGST Rules 2017, directs the jurisdictional Commissioners of CGST/SGST Telangana to monitor this Order under the supervision of the DGAP. 23. A copy of this order be supplied to all the interested parties free of cost and file 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....