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2024 (10) TMI 112 - CCI - GSTProfiteering - failure to pass on the benefit of reduction in the GST rate on Services by way of admission to exhibition of cinematograph films where price of admission ticket is one hundred rupees or less by way of commensurate reduction in price - Section 171 of the Central Goods and Services Tax Act, 2017 - penalty. HELD THAT - 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 above one hundred rupees from 28% to 18% w.e.f. 01.01.2019 and Services by way of admission to exhibition of cinematograph films where price of admission ticket is less than one hundred rupees from 18% to 12% w.e.f. 01.01.2019 upto 30.06.2019. On this account, the Respondent has realised an additional amount to the tune of Rs. 4,65,549/- from the recipients which included both the profiteered amount and GST on the said profiteered amount. Thus, the profiteered amount is determined as Rs. 4,65,549/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017. As per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, the Respondent is therefore directed to reduce the prices of his tickets, keeping in view the reduction in the rate of tax so that the benefit is passed on to the recipients. As per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, the Respondent is therefore directed to reduce the prices of his tickets, 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 Rs. 4,65,549/- 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 in two equal parts, of Rs. 2,32,774.5/- in the Central Consumer Welfare Fund (CWF) and Rs. 2,32,774.5/- in the Telangana State Consumer Welfare Fund (CWF) 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 of 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. Further, the Commission in terms of Rule 136 of the CGST Rules, 2017 directs the jurisdictional Commissioners of CGST/SGST, Telangana to monitor compliance with this Order under the supervision of the DGAP, by ensuring that the amount profiteered by the Respondent as ordered by this Commission is deposited in the respective Consumer Welfare Funds along with interest thereon. A report regarding compliance of this order shall be submitted to this Commission by the DGAP within a period of four months from the date of receipt of this Order.
Issues Involved:
1. Allegation of non-passing GST rate reduction benefit. 2. Examination of the Respondent's submissions. 3. Calculation of profiteering amount. 4. Legal implications and compliance. Detailed Analysis: 1. Allegation of Non-Passing GST Rate Reduction Benefit: The applicant alleged that the Respondent did not pass on the benefit of reduction in the 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. Instead, the Respondent increased the base price to maintain the same tax-cum-selling price of the admission tickets. The DGAP conducted an investigation to determine whether the benefit of GST rate reduction was passed on by the Respondent to the recipients by way of commensurate reduction in price, in terms of Section 171 of the Central Goods and Services Tax Act, 2017. 2. Examination of the Respondent's Submissions: The Respondent contended that the rate of admission tickets in Telangana is fixed by the Licensing Authority and that the theatre owner has no independent right to alter rates without permission. The Respondent obtained permission for enhanced rates in January and May 2019. The Respondent also argued that no benefit accrued to the theatre from the tax rate change, and that the government was directly receiving the revenue. The DGAP clarified that the legal requirement under Section 171 (1) of the CGST Act, 2017, mandates a commensurate reduction in prices in the event of a tax rate reduction. 3. Calculation of Profiteering Amount: The DGAP found that the Respondent increased the base prices of the tickets when the GST rate was reduced. The investigation revealed that the benefit of GST rate reduction was not passed on to the recipients. The DGAP calculated the total profiteering amount as Rs. 24,25,630/-. However, after considering the Respondent's submissions, the DGAP re-calculated the profiteering amount to Rs. 4,65,549/-. This amount included both the profiteered amount and GST on the said profiteered amount. 4. Legal Implications and Compliance: The Commission found that the Respondent had contravened Section 171 (1) of the CGST Act, 2017, by not passing on the benefit of GST rate reduction to the recipients. The Commission directed the Respondent to deposit the profiteered amount of Rs. 4,65,549/- along with interest to be calculated @ 18% from the date of collection till the deposit date. Since the recipients are not identifiable, the amount is to be deposited in the Central and Telangana State Consumer Welfare Funds. The Commission also noted that the penalty under Section 171 (3A) could not be imposed retrospectively for the period in question. Compliance with this order is to be monitored by the jurisdictional Commissioners of CGST/SGST, Telangana, under the supervision of the DGAP, with a compliance report to be submitted within four months.
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