TaxTMI 
TaxTMI 
2026 (6) TMI 98
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....ets is governed by the Central Goods and Services Tax Act, 2017. 3. The Telangana Cinema (Regulation) Act, 1955 empowers the State Government and licensing authorities to regulate cinema theatres, licensing conditions, and admission/ ticket rates. Section 9A prohibits sale of ticket above approved rates and black marketing. 4. The present proceedings arise from a complaint made by the Principal Commissioner, Hyderabad Commissionerate, GST Bhawan, LB Stadium Road, Basheerbagh, Hyderabad - 500004 (hereinafter referred to as "the Applicant"), before the Standing Committee under Rule 128 of the Central Goods and Services Tax Rules, 2017 (for short "the CGST Rules, 2017"), alleging that M/s ASR Cinemas LLP (hereinafter referred to as "the Respondent") has indulged in profiteering in contravention of Section 171 of the Central Goods and Services Tax Act, 2017 (for short "the CGST Act, 2017"), inasmuch as it failed to pass on the benefit of reduction in GST rate on cinema admission tickets from 18% to 12% w.e.f. 01.01.2019 vide Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018, thereby not effecting commensurate reduction in prices to the recipients. 5. The complaint w....
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....9 84.75 94.92 5.36 2. Platinum (35 mm) 90 18 76.27 90 12 80.36 76.27 85.42 5.36 3. Gold Class (70 mm) 70 18 59.32 70 12 62.50 59.32 66.44 5.36 4. Silver class (70 mm) & Gold class (35 mm) 30 18 25.42 30 12 26.79 25.42 28.47 5.39 Average of the increase in base prices 5.37 From the above Table-A, it is observed that although the GST rate was reduced from 18% to 12%, the Respondent increased the base prices of admission tickets across all categories, thereby maintaining the same cum-tax selling price and not passing on the benefit of tax reduction to the recipients. 8. Based on the above findings, the DGAP computed the profiteered amount as under: S.No. Turnover from 01.01.2019 to 30.09.2019 all three category of admission ticket Profiteering in base price in all three category of admission ticket @5.37% GST on profiteering @12% Final profiteering A B C= B*5.37% D= C*12% E= C+ D 1 1,60,87,867/- 8,63,919/- 1,03,670/- 9,67,589/- 1. From Table-B above, it i....
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....n a commensurate reduction in the price of the goods or services or both supplied by him. Provided that the Government may by notification, on the recommendations of the Council, specify the date from which the said Authority shall not accept any request for examination as to whether input tax credits availed by any registered person or 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. Explanation 1. -- For the purposes of this sub-section, "request for examination" shall mean the written application filed by an applicant requesting for examination as to whether input tax credits availed by any registered person or 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. Explanation 2. -- For the purposes of this section, the expression "Authority" shall include the "Appellate Tribunal (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-sectio....
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....vi) Whether the Respondent is liable for imposition of penalty under Section 171(3A) of the CGST Act, 2017? Determination of Profiteering and Passing on of Benefit: 18. Points for determination no. (i) and (ii) are interrelated and arise out of the same set of facts, and hence are being dealt with and disposed of together. 19. The Central Government, on the recommendation of the GST Council, reduced the rate of GST applicable on cinema admission tickets from 18% to 12% w.e.f. 01.01.2019. Section 171(1) of the CGST Act, 2017 mandates that: "Any reduction in rate of tax on any supply of goods or services or the benefit of Input Tax Credit shall be passed on to the recipient by way of commensurate reduction in prices." 20. Thus, the Respondent was under a statutory obligation to pass on the benefit of such reduction to the consumers. From the DGAP report, it is evident that the Respondent, instead of reducing the prices commensurately, increased the base price of cinema tickets post rate reduction. As a result, the benefit arising out of reduction in GST rate was not passed on to the recipients, and the effective price payable by consumers remained the same or inc....
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....d superseded. However, the authorities concerned are directed to take a decision with regard to the difference amounts maintained separately by the petitioners pursuant to the interim orders of this Court; (vii) It is made clear that the petitioners in the writ petitions, in which there are no such earlier interim orders, shall approach the authorities concerned and inform them as to the rates of the tickets, which they intend to collect. All the petitioners are directed to pay the taxes proportionate to the proposed rates of the tickets. 11. With the above directions, the Writ Petitions are disposed of. No costs. Consequently, all the miscellaneous petitions pending, if any, shall stand closed." 22. The order dated 28.06.2018 passed in WP. No. 21782 of 2018 by the Hon'ble High Court, Telangana is reproduced herein: - ORDER: This writ petition is filed to declare the action of the respondents in not fixing the rate of admission for the petitioner-theatre as per their application dated 20.06.2017, as illegal and arbitrary. During the course of hearing, learned counsel for the petitioner submits that the issue involved in the present writ pet....
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.... rate of tax under the G.S.T. is reduced, the benefit should immediately be passed on to the end-user by way of reduction in the prices commensurate with the reduction in the rate of tax. This, in other words, would mean that, the moment there is a cut in the rate of G.S.T., the price of the commodity or the services rendered has to be reduced automatically to the extent of the reduction in the rate of tax. If the supplier continues to sell the product at the same price particularly when the prices are inclusive of G.S.T., the respondent-Department or the beneficiary is not being benefitted by the Government's decision in lowering the rate of tax." 25. Furthermore no material has been placed on record to demonstrate that the Respondent had complied with such conditions. More importantly, such permission, even if assumed, cannot override the statutory mandate under Section 171 of the CGST Act, 2017, which requires passing on the benefit of reduction in tax rate to the consumers. Adjudication of Point for Determination No. (iii) 26. With regard to the levy of GST on the profiteered amount, it is observed that the DGAP has computed the base profiteered amount at Rs. 8,63,919....
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....dent in terms of Rule 133(2A) of the CGST Rules, 2017, thereby granting an opportunity to file submissions, if any, against the findings recorded therein. It is, however, observed that despite such opportunity, no response or written submissions were received from the Respondent. 33. The Respondent was thereafter directed to appear before this Authority on multiple occasions. Notices were issued through various modes, including email, speed post, as well as through the jurisdictional Commissionerate, to ensure effective service. Further, in compliance with the principles of natural justice, an additional opportunity was granted and the jurisdictional Commissionerate was specifically directed to ensure service of notice and submit an action taken report. However, despite confirmed service and repeated opportunities, the Respondent failed to appear before this Authority or file any submissions. 34. It is also observed that during the course of investigation, the Respondent did not furnish complete and requisite information as called for by the DGAP, and therefore, the determination of profiteering was carried out on the basis of available data, including sample invoices and sta....
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....ds as under: "(3) Where the Authority determines that a registered person has not passed on the benefit of the reduction in the rate of tax on the supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices, the Authority may order- (c) the deposit of an amount equivalent to fifty per cent of the amount determined under the above clause [along with interest at the rate of eighteen per cent from the date of collection of the higher amount till the date of deposit of such amount] in the Fund constituted under section 57 and the remaining fifty per cent of the amount in the Fund constituted under section 57 of the Goods and Services Tax Act, 2017 of the concerned State, where the eligible person does not claim return of the amount or is not identifiable;" 38. It is observed that the provisions relating to levy of interest under Rule 133(3)(c) of the CGST Rules, 2017 were inserted vide Notification No. 31/2019-Central Tax dated 28.06.2019 and came into effect from the same date. Accordingly, levy of interest under the said provision can operate only prospectively from 28.06.2019 and not for the period p....