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TMI Blog2021 (5) TMI 934X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1-1-2019. Along with the application, Applicant No. 1 had also submitted the APAF-1 Form, copies of cinema tickets issued in the pre and post rate reduction period, and the details of the GST paid. 2. Vide his above Report, the DGAP has reported that Applicant No. 1 had alleged that the Respondent has not passed 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 was one hundred rupees or less" from 18% to 12% which came into effect on 1-1-2019 vide Notification No. 27/2018-Central Tax (Rate), dated 31-12-2018 and that the Respondent had instead increased the base price of the tickets. Along with the application, the Standing Committee has also forwarded the Annexure to APAF-1 confirming the fact of an increase in the base prices of the tickets and letter dated 31-12-2018 and 13-2-2019 of the Respondent to the State Standing Committee on Anti-Profiteering. 3. The DGAP has stated that on receipt of the aforesaid reference from the Standing Committee on Anti-profiteering, a notice under Rule 129 of the Rules was issued on 9-7-2019 calling upon the Respondent to respond as to wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... + Tax Dated 1-1-2019 to 10-3-2019 Total Basic + Tax Dated 11-3-2019 to 8-5-2019 Total Basic + Tax Dated 9-5-2019 Onwards Total Basic + Tax Tax Basic Tax Basic Tax Basic Tax Basic GST Rate GST Rate GST Rate GST Rate 18% Rs. Rs. 12% Rs. Rs. 12% Rs. Rs. 12% Rs. Rs. Upper & Lower Balcony 18 100 118 12 100 112 12 100 112 12 100 112 First Class 12.20 67.80 80 8.57 71.43 80 8.03 66.97 75 8.57 71.43 80 Second Class 7.63 42.37 50 5.35 44.65 50 4.82 40.18 45 5.35 44.65 50 5. The Respondent, vide the afore-mentioned e-mails/letters, also furnished the following documents/information before the DGAP :- (a) Invoice-wise details of all outward taxable supplies of the movie admission tickets impacted by GST rate reduction w.e.f. 1-1-2019, during the period 1-12-2018 to 30-6-2019. (b) Price List of the aforesaid movie admission tickets, pre and post 1-1-2019. (c) Sample copies of the invoice/tickets, pre GST rate reduction 1-1-2019. (d) Copies of GSTR-3B Returns for the period from December, 2018 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no other method to pass on such benefits. From 1-1-2019, the Respondent, in terms of Section 171 of the CGST Act, 2017, was bound to maintain the base prices of the tickets across all class of seats/slots and GST should have been charged on the pre rate reduction base prices. 10. The DGAP has reported that after examination of the details of sales data, letter of the Applicant No. 1, and the replies submitted by the Respondent it was observed that there were three categories of tickets i.e. Upper and Lower Balcony-Rs. 118/-, First Class-Rs. 80/- and Second Class-Rs. 50/- sold by the Respondent during the pre-rate reduction period effective from 1-12-2018 to 31-12-2018. With effect from 1-1-2019, the price of the Upper and Lower Balcony tickets was reduced to Rs. 112/-, whereas the prices of the First Class and Second Class tickets were kept unchanged at Rs. 80/- and Rs. 50/- respectively. 11. The DGAP has further stated that as per the sales data made available by the Respondent, it was observed that the Respondent has increased the base prices of the admission tickets when the GST rate was reduced from 18% to 12% w.e.f. 1-1-2019 and has furnished the details of the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ease/ decrease in the base price of the ticket* Tax Basic Tax Basic Tax Basic Tax Basic GST Rate GST Rate GST Rata GST Rate 18% Rs. Rs. 12% Rs. Rs. 12% Rs. Rs. 12% Rs. Rs. Upper & Lower Balcony 18 100 118 12 100 112 12 100 112 12 100 112 0 First Class 12.20 67.80 80 8.57 71.43 80 8.03 66.97 75 8.57 71.43 80 -0.83 Second Class 7.63 42.37 50 5.35 44.65 50 4.82 40.18 45 5.35 44.65 50 -2.19 14. The DGAP has claimed that as per the above Table, it could be concluded that there was no profiteering on the tickets of Rs. 75/- and Rs. 45/- during the period from 11-3-2019 to 8-5-2019 and hence, the same period has not been taken into account in respect of the above-mentioned tickets while computing the profiteered amount. 15. The DGAP has stated that based on the aforesaid reduction in GST rate and the details of outward supplies for the period from 1-12-2018 to 30-6-2019 submitted by the Respondent, it was found that profiteering during the period from January, 2019 to June, 2019 from the sale of tickets in three categories amounted to Rs. 0/- for Upper and Lower Balcony (due to not in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been provided by the Respondent. Based on the details of outward supplies of the tickets (Services) submitted by the Respondent, it was observed that he had sold admission tickets in the State of Telangana only. 17. The investigation report was received by this Authority on 27-12-2019 and it was decided to accord an opportunity of hearing to the Applicants and the Respondent on 20-1-2020. Notice dated 1-1-2020 was also issued to the Respondent directing him to explain why the Report dated 27-12-2019 furnished by the DGAP should not be accepted and his liability for violation of the provisions of Section 171 of the CGST Act, 2017 should not be fixed. Sh. Raj Tadla, Partner appeared in person and vide submissions dated 27-1-2020 has submitted :- (a) That from the date when the tax rate was reduced, he had charged the reduced price to his customers. (b) That since a movie ticket was a service and no stocking was required, he did not have any benefit of ITC due to tax rate changes and that he had forwarded the benefit of ITC accrued to his customers. (c) That he has been provided with a range of tic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate reduction that took effect on 1-1-2019. 18. Supplementary Report was also called from the DGAP on the above submissions of the Respondent under Rule 133(2A) of the CGST Act, 2017. The DGAP vide his report dated 26-2-2020 has submitted his clarifications and has stated :- (a) That the legality of the investigation conducted by him was derived from Section 171(1) of the CGST Act, 2017 which governed anti-profiteering provisions under GST law. As per the provisions of Section 171 of the Act, the legal requirement was that in the event benefit of ITC or reduction in the rate of tax, there must be a commensurate reduction in the prices of the goods or services. Such reduction could obviously be only in monetary terms so that the final price payable by a consumer got reduced commensurately with the reduction in the tax rate. Accordingly, the investigation carried out by DGAP had looked into the aspect of price reduction as per the Notification No. 21/2018-Central Tax (Rate), dated 31-12-2018 by which the Central Government on the recommendation of the GST Council had reduced the GST rate on "Services by way of admission to exhibition of cinematographi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That the Respondent as per his submissions has informed that the theatre owner has no independent right to fix the prices of the admission tickets and that the State Government has provided them with a range of ticket prices within which the theatre owners could fix the prices based on certain factors/attributes of the movie. In the same written submission, the Respondent has mentioned that the ticket prices were controlled by the film owners/producers/ distributors based on the demand for the film. However, the Respondent has not submitted any document to prove that rates were controlled by either. The Respondent has neither submitted the order showing fixation/capping of prices by the State Government nor any agreement showing price negotiations made by the film owners/producers/distributors. It was also important to mention that irrespective of who decided the prices of admission tickets, the main issue was that the benefit of reduction in the rate of tax has to be passed on to the buyers by reducing the final prices commensurately. The quantum of the amount of profiteering calculated was based on prices of the admission tickets pre and post rate reduction taken from the outwar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9, a new movie "Vinaya Vidhaya Rama" was exhibited. Hence, the new movie was a whole new product and the pricing of this movie was his prerogative. The new movie was a new product and hence the movie tickets for the same could not be forced to be sold at older prices. (c) That any anti-profiteering measures should be enforced only till 10-1-2019. 20. We have carefully perused the submissions of the Applicants and the Respondent as also the case record placed before us and 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. 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. 21. On examining the various submissions placed on record, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te reduction, thus nullifying the impact of tax rate reduction for the customers. Therefore, the benefit of tax rate reduction to be passed on to the customers/recipients was not passed on as per the provisions of Section 171 of the CGST Act, 2017 by the Respondent. 23. The Respondent has further contended that he was providing the services in respect of admission to the exhibition of cinematography films and no stocking was possible and hence, he did not have any benefit of ITC due to tax rate changes. In this connection, it would be relevant to mention that the DGAP has carried out the investigation in respect of the services provided by the Respondent and looked into the aspect of price reduction as per the Notification No. 27/2018-Central Tax (Rate), dated 31-12-2018. Therefore, the question of stocking of the goods does not arise in the present case and the same does not have any impact on the amount of profiteering. Hence, the above contention made by the Respondent is not correct. 24. The Respondent has argued that the State Government has provided him with a range of ticket prices within which he kept changing the prices of the tickets based on various factors l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the Respondent, since the nature of service supplied by the Respondent is the same, different movies can't be treated as different products as long as the cinema hall is the same and the impact of rate reductions would be applicable on the services being supplied irrespective of the film being screened. Therefore, the above contention of the Respondent cannot be accepted. 27. We find that among the other contentions, the Respondent vide his submissions dated 27-1-2020 has stated that he had reduced the prices of his movie tickets commensurately with the reduction in the rate of tax w.e.f. 11-3-2019 and that he had subsequently increased the prices of the movie tickets w.e.f. 9-5-2019. We also find that this contention of the Respondent has also been incorporated by the DGAP in Para 16 of his report dated 27-12-2019, which reads as under :- "However, the Noticee vide letter dated 24-7-2019 submitted that they had reduced the base price of the tickets to Rs. 75/- and Rs. 45/- (for the first class and second class tickets) for certain period i.e., w.e.f. 11-3-2019 to 8-5-2019 post GST period : Upon analyzing the same it has come to light that for the period as mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the same base prices in respect of the Upper and Lower Balcony categories of movie tickets and hence, we observe 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, given the above, we find this case to be a fit case for recomputation of the amount of profiteering in line with the above observations. 29. Therefore, 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. 30. 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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