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2021 (5) TMI 934 - NAPA - GSTProfiteering - supply of Services by way of admission to exhibition of cinematograph films where the price of admission ticket was one hundred rupees or less - despite the reduction in the rate of GST, the benefit had not been passed on - contravention of section 171 of CGST Act - HELD 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. 1-1-2019, 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. In this case, since the Respondent has increased the price of the movie tickets of the First and the Second class categories only in the month of May, 2019, this price increase cannot be correlated to provisions of Section 171 of the CGST Act, 2017. It is also a fact that the DGAP has reported that in the post-tax-rate reduction period, the Respondent has maintained the same base prices in respect of the Upper and Lower Balcony categories of movie tickets and hence, it is observed that there is no profiteering in the above category of these movie tickets. Therefore, though profiteering has been established against the Respondent in the categories of First class and Second class movie tickets, the computation of profiteering merits to be limited only up to 10-3-2019 as the Respondent had reduced the base prices commensurately for the First class and Second class movie tickets after 11-3-2019. No profiteering can thus arise for the period after 11-3-2019. Therefore, this case is a fit case for recomputation of the amount of profiteering - under the provisions of Rule 133(4) of the CGST Rules, 2017, this Authority directs the DGAP to recompute the amount of profiteering in line with the observations made in the preceding paragraph. The DGAP is further directed to furnish his Report under Rule 129(6) of the CGST Rules, 2017. 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 from the DGAP under Rule 129(6) of the above Rules. Since the present Report has been received by this Authority on 30-10-2019 the order was to be passed on or before 29-4-2020. However, due to the prevalent pandemic of COVID-19 in the Country, this order could not be passed on or before the above date due to force majeure. Accordingly, this order is being passed today in terms of the Notification No. 65/2020-Central Tax, dated 1-9-2020 issued by the Government of India, Ministry of Finance (Department of Revenue), Central Board of Indirect Taxes Customs under Section 168A of the CGST Act, 2017 - application disposed off.
Issues Involved:
1. Whether the GST rate on "Services by way of admission to the exhibition of cinematograph films where the price of admission ticket was less than one hundred rupees" was reduced from 18% to 12% w.e.f. 1-1-2019. 2. Whether the benefit of such reduction in the rate of GST had been passed on by the Respondent to his recipients, in terms of Section 171 of the CGST Act, 2017. 3. Whether the Respondent increased the base prices of the tickets, thereby nullifying the impact of the tax rate reduction. 4. Whether the Respondent's arguments and evidence provided were adequate to refute the allegations of profiteering. 5. Whether the recomputation of the profiteered amount should be limited to a specific period. Detailed Analysis: Issue 1: Reduction in GST Rate The DGAP confirmed that the Central Government, on the recommendation of the GST Council, reduced the GST rate on "Services by way of admission to the exhibition of cinematograph films where the price of admission ticket was less than one hundred rupees" from 18% to 12% w.e.f. 1-1-2019, as per Notification No. 27/2018-Central Tax (Rate), dated 31-12-2018. This fact was not contested by the Respondent. Issue 2: Passing on the Benefit of GST Rate Reduction The investigation revealed that the Respondent did not pass on the benefit of the GST rate reduction to the recipients. Despite the reduction in GST, the Respondent kept the final price of the movie tickets unchanged by increasing the base prices of the tickets. This contravened Section 171 of the CGST Act, 2017, which mandates that any reduction in the tax rate must result in a commensurate reduction in prices. Issue 3: Increase in Base Prices The DGAP's investigation found that the Respondent increased the base prices of the admission tickets for First Class and Second Class categories when the GST rate was reduced from 18% to 12%. The base prices increased from ?67.80 to ?71.43 for First Class tickets and from ?42.37 to ?44.65 for Second Class tickets, thereby nullifying the impact of the tax rate reduction. Issue 4: Respondent's Arguments and Evidence The Respondent argued that: - The reduced rate of tax was charged from the customers. - No benefit of ITC was accrued due to the nature of the service. - The ticket prices were changed based on various factors like the age of the movie and performance. - The difference amount accrued to the producer/distributor, not to the Respondent. However, the DGAP found these arguments unsubstantiated. The investigation showed that the prices of the tickets remained more or less uniform post-tax rate reduction and were not dynamically changed as claimed by the Respondent. No documentary evidence was provided to support the Respondent's claims about the influence of producers/distributors on ticket pricing. Issue 5: Recomputing the Profiteered Amount The DGAP acknowledged that the Respondent reduced the base prices of First Class and Second Class tickets during the period from 11-3-2019 to 8-5-2019. Therefore, this period was excluded from the calculation of the profiteered amount. The total profiteered amount was recomputed to ?1,29,243/- for the period from 1-1-2019 to 30-6-2019, excluding the period from 11-3-2019 to 8-5-2019. Conclusion: The Authority directed the DGAP to recompute the amount of profiteering in line with the observations made. The Respondent was found to have contravened the provisions of Section 171 of the CGST Act, 2017, by not passing on the benefit of the reduction in the GST rate to the recipients. The recomputation of the profiteered amount should exclude the period from 11-3-2019 to 8-5-2019, during which the Respondent had reduced the base prices of the tickets commensurately.
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