2020 (12) TMI 1202 - NAPA - GST

Profiteering - supply of Services by way of admission to exhibition of cinematograph films where price of admission ticket is one hundred rupees or less - allegation that the reduction in the rate if GST not passed on - contravention of section 171 of CGST Act - penalty - Whether there was any reduction in the GST rate and whether the benefit of reduction in the rate of tax was passed on or not to the recipients as provided under Section 171 of the CGST Act, 2017? - HELD THAT - It has been revealed 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% and Services by way of admission to exhibition of cinematograph films where the price of admission ticket was 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, 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. The Respondent has resorted to profiteering by way of either increasing the base prices of the service while maintaining the same selling prices or by way of not reducing the selling prices 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 is one hundred rupees or less from 18% to 12% w.e.f. 01.01.2019 to 30.06.2019. On this account, the Respondent has realized an additional amount to the tune of ₹ 2,23,850/- from the recipients which included both the profiteered amount and GST on the said profiteered amount. Thus the profiteering is determined as ₹ 2,23,850/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017. The Respondent is therefore directed to reduce the prices of his tickets as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, keeping in view the reduction in the rate of tax so that the benefit is passed on to the recipients. The Respondent is also directed to deposit the profiteered amount of ₹ 2,23,850/- along with the interest to be calculated @ 18% from the date when the above amount was collected by him from the recipients till the above amount is deposited. Since the recipients, in this case, are not identifiable, the Respondent is directed to deposit the amount of profiteering of ₹ 1,11,925/- in the Central Consumer Welfare Fund (CWF) and ₹ 1,11,925/- in the Telangana State CWF as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017, along with 18% interest. The above amount shall be deposited within a period of 3 months from the date of receipt of this Order failing which the same shall be recovered by the Commissioner CGST and SGST as per the provisions of the SGST Act, 2017. This Authority as per Rule 136 of the CGST Rules 2017 directs the Commissioners of SGST Telangana to monitor this Order under the supervision of the DGAP by ensuring that the amount profiteered by the Respondent as Ordered by the Authority is deposited in the respective CWFs. A report in compliance of this Order shall be submitted to this Authority by the DGAP within a period of 3 months from the date of receipt of this Order - As per the provisions of Rule 133 (1) of the CGST Rules, 2017 this Order was required to be passed within a period of 6 months from the date of receipt of the Report furnished by the DGAP under Rule 129 (6) of the above Rules. Since the present Report has been received by this Authority on 30.10.2019, this Order was to be passed by 29.04.2020. However, due to the prevalent pandemic of COVID-19 in the country, this Order could not be passed before the above date due to force majeure. Accordingly, this Order is being passed today on 17.11.2020 in terms of the Notification No. 65/2020- Central Tax dated 01.09.2020 issued by the Government of India, Ministry of Finance (Department of Revenue), Central Board of Indirect Taxes and Customs under Section 168 A of the CGST Act, 2017.

Summary

Issues Involved:
1. Alleged profiteering by the Respondent in respect of the supply of services by way of admission to the exhibition of cinematograph films.
2. Compliance with Section 171 of the CGST Act, 2017 regarding the reduction in GST rate from 18% to 12%.
3. Determination of the profiteered amount and its deposition.

Detailed Analysis:

Issue 1: Alleged Profiteering by the Respondent
The case arose from an application alleging that the Respondent did not pass on the benefit of GST rate reduction on movie admission tickets from 18% to 12%, effective from 01.01.2019, as per Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018. Instead, the Respondent was accused of increasing the base prices to maintain the same cum-tax selling prices. The investigation by the Director-General of Anti-Profiteering (DGAP) revealed that the Respondent sold tickets at prices not reflecting the GST rate reduction, thus limiting the investigation to the reduced GST rate for three specified categories of tickets.

Issue 2: Compliance with Section 171 of the CGST Act, 2017
Section 171 (1) of the CGST Act mandates that any reduction in the tax rate must be passed on to the recipient by way of a commensurate reduction in prices. The DGAP's investigation found that the Respondent increased the base prices of tickets despite the GST rate reduction, thereby not passing the benefit to the consumers. The Respondent contended that the ticket prices were regulated by the State Government and that he faced practical difficulties in reducing prices. However, the DGAP found no evidence supporting the Respondent's claims and observed that the Respondent's actions did not comply with Section 171.

Issue 3: Determination of the Profiteered Amount and its Deposition
The DGAP calculated the profiteered amount to be ?2,23,850/- based on the increase in base prices for the period from 01.01.2019 to 30.06.2019. The Respondent was directed to deposit this amount along with interest calculated at 18% from the date of collection until the deposit date. Since the recipients were not identifiable, the amount was to be deposited equally in the Central Consumer Welfare Fund (CWF) and the Telangana State CWF. The Respondent was given three months to comply, failing which the amount would be recovered by the Commissioner CGST and SGST as per the SGST Act, 2017.

Conclusion:
The Authority found that the Respondent had not passed on the benefit of GST rate reduction as required under Section 171 of the CGST Act, 2017. The Respondent was ordered to reduce ticket prices accordingly and deposit the profiteered amount with interest into the specified welfare funds. The Commissioners of SGST Telangana were directed to monitor compliance, and a report was to be submitted within three months. The Order was passed on 17.11.2020, considering the delay due to the COVID-19 pandemic.