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2024 (7) TMI 97 - CCI - GSTProfiteering - non-reduction of selling prices of the tickets (Services) commensurately. despite the rate reduction In GST rate - benefit of reduction of rate of GST not passed on to the recipients - Section 171 of the CGST Act, 2017 - levy of penalty - HELD THAT - This Commission finds that the Respondent had resorted to profiteering by way of either increasing the base price of the service while maintaining the same selling price or by way of not reducing the selling price 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 was above one hundred rupees from 28% to 18% wef. 01.01.2019 upto 30.06 2019. On this account, the Respondent profiteered to the tune of 48,25,970/- (including GST) from the recipients. Thus the profiteered amount was determined as Rs. 48.25.970/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017 Further, as per the provisions of Rule 133 (3) (a) of the CGST Rules. 2017. the Respondent is directed to reduce the prices of his tickets, keeping in view the reduction in the rate of tax so that the benefit would be passed on to the recipients The Respondent is also directed to deposit the profiteered amount of Rs. 48,25,970/- along with the interest, which is to be calculated @ 18% from the date, when the above amount was collected by him, from the recipients. The Respondent is directed to deposit the amount of profiteering in two equal parts, of Rs. 24.12.985/- in the Central Consumer Welfare Fund and Rs. 24,12.985/- In the Telangana State Consumer Welfare Fund as per the provisions of Rule 133 (3) (c) of the CGST Rules, 2017, along with interest@ 18%. 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 jurisdictional Commissioner CGST/SGST as per the provisions of the CGST/SGST Act, 2017. Penalty - HELD THAT - The Respondent has denied benefit of rate reduction to his customers/recipients in contravention of the provisions of Section 171 (1) of the CGST Act, 2017 and has committed an offence under Section 171 (3A) of the above Act. However. perusal of the provisions 01 Section 171 (3A), under which liability for penalty arises for the above violation, shows that it has been inserted in the CGST Act, 2017 w e.f. 01.01.2020 vide Section 112 of the Finance Act, 2019 and it was not in operation during the period from 01.07.2017 to 30.06.2019 when the Respondent had committed the above violation. Hence, the penalty prescribed under Section 171 (3A) cannot be imposed on the Respondent retrospectively for the said period. Application disposed off.
Issues Involved:
1. Whether the reduction in GST rate was passed on to the recipients. 2. Whether the investigation was time-barred. 3. Whether the base prices were appropriately considered. 4. Whether the DGAP exceeded the scope of the complaint. 5. Whether the Respondent's actions constituted profiteering under Section 171 of the CGST Act, 2017. Detailed Analysis: 1. Whether the reduction in GST rate was passed on to the recipients: The Commission examined whether the GST rate reduction on "Services by way of admission to exhibition of cinematography films" from 28% to 18% was passed on to the recipients. The DGAP's investigation revealed that the Respondent increased the base prices of tickets instead of reducing the selling prices commensurately with the GST rate reduction. This was evident from the comparison of pre and post-GST rate reduction prices. The total profiteered amount was calculated as Rs. 48,25,970/-. The Respondent's failure to pass on the GST rate reduction benefit violated Section 171 of the CGST Act, 2017. 2. Whether the investigation was time-barred: The Respondent contended that the investigation was time-barred as per Rule 128 of the CGST Rules, 2017. However, the Commission found that the complaint dated 29.03.2019 was received by the DGAP on 18.04.2019 and forwarded to the Standing Committee, which met on 15.05.2019. The period between 18.04.2019 and 15.05.2019 was less than two months, thus within the time limit. Therefore, the investigation was not time-barred. 3. Whether the base prices were appropriately considered: The Respondent argued that the DGAP should have considered the base prices before the introduction of GST. However, the Commission clarified that the DGAP's investigation starts only when Section 171 of the CGST Act, 2017 is attracted, i.e., when there is a reduction in the rate of tax on supply of goods or services. The relevant notification was effective from 01.01.2019, and thus, the DGAP's consideration of base prices post-GST rate reduction was appropriate. The Respondent's contention was not tenable. 4. Whether the DGAP exceeded the scope of the complaint: The Respondent claimed that the DGAP exceeded the scope of the complaint. However, the Commission noted that Section 171 (2) of the CGST Act, 2017 empowers the Authority to examine whether the reduction in tax rate resulted in a commensurate reduction in prices for all supplies made by a registered person. This implies that the investigation can cover all supplies, not just those mentioned in the complaint. Therefore, the DGAP did not exceed the scope of the complaint. 5. Whether the Respondent's actions constituted profiteering under Section 171 of the CGST Act, 2017: The Commission found that the Respondent's actions of increasing the base prices of tickets while maintaining the same selling price or not reducing the selling price commensurately with the GST rate reduction constituted profiteering. The total profiteered amount was determined to be Rs. 48,25,970/-. The Respondent was directed to deposit this amount along with interest at 18% into the Central and Telangana State Consumer Welfare Funds. The Commission also noted that the penalty provisions under Section 171 (3A) could not be applied retrospectively for the period in question. Conclusion: The Commission concluded that the Respondent had profiteered by not passing on the GST rate reduction benefit to the recipients, violating Section 171 of the CGST Act, 2017. The Respondent was ordered to deposit the profiteered amount of Rs. 48,25,970/- along with interest into the respective Consumer Welfare Funds. The jurisdictional Commissioners of CGST/SGST Telangana were directed to monitor compliance with this order.
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