TaxTMI 
TaxTMI 
2026 (8) TMI 1050
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....t alleged that the Respondent did not pass on the benefit of reduction in the GST rate on the "Services by way of admission exhibition of cinematograph films where price of admission ticket is one hundred rupees or less", from 18% to 12% w.e.f. 01.01.2019, vide Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018 (hereinafter referred to as "the Notification") and, instead, increased the base price to maintain the same cum-tax selling price. 3. The said complaint was examined by the Standing Committee on Anti-Profiteering and the same was forwarded to the Directorate General of Anti-Profiteering (hereinafter referred to as "the DGAP") to initiate investigation and collect necessary evidence on 05.08.2019 under Rule 129(1) of the CGST Rules, 2017. 4. Upon completion of the investigation, the DGAP submitted its report under Rule 129(6) of the CGST Rules, 2017 dated 31.01.2020 to the National Anti-Profiteering Authority (NAA), the erstwhile authority competent to examine matters relating to anti-profiteering. 5. The observations and findings drawn by the DGAP are summarized as follows: 5.1. The period of investigation is 01.01.2019 to 31.07.2019. 5.2....
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....table, it was observed that the Respondent had increased the base price of the admission ticket of Rs. 100/- from Rs. 84.74 to Rs. 89.28, the price of the ticket of Rs. 60/- from Rs. 50.84 to Rs. 53.57, and the price of the ticket of Rs. 30/- from Rs. 25.42 to Rs. 26.78, whereas the same should have been revised to Rs. 94.91/- for the ticket of Rs. 100/- Rs. 56.94/- for the ticket of Rs. 60/- and Rs. 28.47/- for the ticket of Rs. 30/-, inclusive of GST @ 12% 5.7. In view of the above, it was concluded that the benefit of the GST rate reduction from 18% to 12% in respect of "services by way of admission to exhibition of cinematography films" was not passed on to the recipients. Thus, the Respondent had contravened the provisions of Section 171 of the CGST Act, 2017. 5.8. Further, the quantification of the profiteering amount for the period from 01.01.2019 to 31.07.2019 is tabulated as under:- 01.01.2019 TO 31.07.2019 Sr.No. Admission ticket Base price charged (in Rs.) Commensurate base price (in Rs.) Excess amount charged per ticket Excess tax charged per ticket ....
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....w that the present writ petitions can be disposed of with the following directions: i) G.O.Ms.No.100, Home (General.A1) Department, dated 26.4.2013 is set aside. ii) Both the Governments are directed to constitute their respective committees headed by the respective Principal Secretaries for Home. Insofar as the other members of the Committees are concerned, it is left open to the respective Principal Secretaries for Home to choose the exhibitors, distributors and other members to participate in the committee so as to adjudicate the issues involved in all the writ petitions. iii) While taking decision, the committees are directed to consider the welfare of the cine-goers primarily and also the grievance of the exhibitors and distributors and frame the rules in accordance with law on or before 30.3.2017; iv) If any decisions are taken and any G.O. is issued prior to 30.3.2017, the same shall become operative in nature. v) The petitioners-theatres are permitted to run their respective theatres by collecting their proposed fares. However, it is made clear that the petitioners shall inform to the Authorities concerned as to the ticket rates,....
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....f the said order, as relied upon by the Respondent, reads as follows: Following the same, there shall be direction to respondents to permit the petitioner theatre to run theatre by collecting its proposed fares. However, it is made clear that the petitioner shall inform to the authorities concerned as to the ticket rates, which it intends to collect in respect of all classes till adjudication of the issues in question by the respective committees. The petitioner shall approach the authorities concerned and inform them as to the rates of the tickets, which it intends to collect. The petitioner is directed to pay the taxes proportionate to the proposed rates of the tickets." 8.6. The Respondent also relied upon the order dated 02.08.2019 passed by the Hon'ble High Court of Telangana in W.P. No. 18232 of 2019, submitting that a similar direction had been issued permitting the theatre owners to run their theatres by collecting their proposed fares, subject to informing the concerned authorities and paying taxes proportionate to the proposed rates. 8.7. The Respondent further submitted that the Central Government, vide Notification No. 27/201....
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.... for the period from 01.01.2019 to 31.07.2019 amounted to Rs. 4,72,038/-. 9.3. The DGAP submitted that although the licensing authority may fix the maximum permissible prices of tickets, the obligation under Section 171 to pass on the benefit of reduction in the tax rate accrues upon the supplier. It contended that, accordingly, the Respondent was required to reduce the ticket prices commensurately upon reduction of the GST rate. 9.4. The DGAP also relied upon the judgment of the Hon'ble High Court of Telangana in M/s Sudarshan Theatre 35MM v. UOI W.P. No. 4760 of 2021, particularly paragraph 17 thereof, wherein the Hon'ble High Court observed that Section 171 of the CGST Act, 2017 has been enacted to ensure that the benefit arising from reduction in the rate of GST is passed on to the end-user by way of commensurate reduction in prices. The Hon'ble High Court further held that where prices are inclusive of GST, continuation of the same price despite reduction in the tax rate would deprive the consumer of the benefit intended by the Government. It was also observed that Sections 171 and 172 do not provide any exception in cases of non-reduction in the price of cin....
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....tion under Section 171(1) of the CGST Act, 2017? (iii) Whether the profiteering amount of Rs. 4,72,038/- determined by the DGAP for the period 01.01.2019 to 31.07.2019 is correct and sustainable? Determination of Issue (i) 12. We have carefully considered the DGAP Report dated 31.01.2020, the written submissions filed by the Respondent, the clarification furnished by the DGAP and the material available on record. The issue arising for consideration is whether, consequent upon the reduction in the rate of GST from 18% to 12% w.e.f. 01.01.2019 in respect of "services by way of admission to exhibition of cinematography films where price of admission ticket is one hundred rupees or less", the Respondent was required to pass on the benefit of such reduction to the recipients by way of commensurate reduction in the prices of the admission tickets. 13. At the outset, it is pertinent to refer to Section 171(1) of the CGST Act, 2017, which reads as under: 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." 14. The aforesaid provision c....
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.... GST at the reduced rate, but also to ensure that the benefit arising from such reduction actually reaches the recipient. Where the supplier increases the base price so as to maintain the same cum-tax selling price, the benefit of the reduction in tax is effectively retained by the supplier and is not passed on to the recipient. The respondent defeated the intention of the legislature by increasing the base price. 19. The aforesaid position is also supported by the decision of this Tribunal in Mallikarjuna Cinema Hall (supra) and DGAP v. Vishwanath Cinema (Case No. NAPA/25/PB/2025), wherein, while considering the applicability of Section 171 to cinema ticket prices governed by the Telangana regulatory framework, this Tribunal observed as follows: 28. The next two questions cast by us, are related in the sense that the Respondent has contended that the increase in price of the tickets was in line of the provision of Cinemas Act of the state of Telangana and then they charging of Rs. 3/- as non-taxable charge are also not absolving the Respondent from the violation of Section 171, CGST Act. The Cinemas Act and the Government orders passed there on does not provide for non....
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....he GST rate was reduced from 18% to 12% w.e.f. 01.01.2019, the Respondent was statutorily required under Section 171(1) of the CGST Act, 2017 to pass on the resultant benefit to the recipients by way of a commensurate reduction in the prices of the admission tickets. The Respondent could not retain the benefit of such reduction by increasing the base price and maintaining the same cum-tax selling price. 23. Accordingly, we hold that the Respondent was liable to pass on the benefit arising from the reduction in the GST rate from 18% to 12% w.e.f. 01.01.2019 by way of commensurate reduction in the prices of the admission tickets. Issue No. 1 is, accordingly, answered in the affirmative. Determination of Issue (ii) 24. We have considered the submission of the Respondent that it was permitted by the Hon'ble High Court of Telangana to collect its proposed fares and that it had intimated the ticket rates to the concerned authorities. Even assuming that the Respondent had duly intimated and was permitted to collect such proposed fares, such permission cannot be construed as permitting retention of the benefit arising from reduction in the GST rate, nor can it override the indepen....
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.... Hyderabad, seeking permission to enhance the rates of entry tickets for the period from 09.01.2021 to 28.01.2021, in respect of the following rates: It is respectfully submitted that, our theatre obtained Form-B licence from your good offices and as per the government prescribed rates, we cannot bear the expenses of viz., staff salaries, electricity bill, sanitary expenses, picture screen expenses, machinery maintenance, etc as they have become excess. Thus, due to the above expenses we are facing hardship in running the theatre. For the above said reasons I/we request your good offices to allow us to enhance rates of the entry tickets from 09-01-2021 to 28-01-2021. For following Movies KRACK, RED, Master & Alludu Adurs. The details of the proposed rates to be enhanced are given below: Class Existing Rates Proposed Rates Diamond Circle 97 + 3 = Rs. 100-00 147 + 3 = Rs. 150-00 Emerald Circle 57 + 3 = Rs. 60-00 97 + 3 = Rs. 100-00 Ruby Circle 27 + 3 = Rs. 30-00 47 + 3 = Rs. 50-00 28. From the above, it is evident that the aforesaid representations pertain to specific and limited periods subsequent to the period ....
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..... 4760 of 2021, particularly paragraph 17 thereof, is directly relevant. The Hon'ble High Court, while examining the scope and operation of Section 171 of the CGST Act, observed as follows: 17. A plain reading of the said provision of law clearly indicates that the said provision has been introduced to ensure that the supplier of goods and services should not make profit from the reduction of the tax rate under the G.S.T. law. Rather the intention of the Government is that the moment the 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. A reading of Sections 171 and 172 of the G.....
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....ate from 18% to 12% by way of commensurate reduction in the prices of the admission tickets and that the directions/orders of the Hon'ble High Court of Telangana relied upon by the Respondent did not absolve it of such statutory obligation, we now proceed to examine the correctness of the quantification of profiteering made by the DGAP. 36. The DGAP, for determining the amount of profiteering, compared the base prices of the admission tickets prevailing prior to the reduction in the rate of GST with the base prices actually charged by the Respondent after 01.01.2019. The pre-rate-reduction base prices were arrived at after excluding GST @ 18% from the cum-tax prices, and the commensurate prices after the rate reduction were determined by retaining such base prices and applying GST @ 12%. 37. On the basis of the aforesaid methodology, the DGAP determined the excess amount charged per ticket and the corresponding profiteering for the quantity of tickets sold during the relevant period. The DGAP also examined the tickets sold at other rates, including Rs. 80/- Rs. 110/- and Rs. 125/-, and, upon verification of the documents furnished by the Respondent, excluded the transactions ....