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TMI Blog2023 (12) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,19,1871- from the recipients which included both the profiteered amount and GST on the said profiteered amount. Thus the profiteering amount is determined as Rs. 7,19,187/- 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 Rs. 7,19,1871- 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 Rs. 3,59,594/- in the Central Consumer Welfare Fund (CWF) and Rs. 3,59,594/- in the Telangana State CWF respectively, 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 this Order failing which the same shall be recovered by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Price of Ticket is Rs. 30/- Before (01.01.2019) Base Price 84.75 67.80 50.85 25.42 Tax Rate 18% 18% 18% 18% Tax Amount 15.25 12.20 9.15 4.58 Total 100.00 80.00 60.00 30.00 On or after (01.01.2019) Base Price 89.29 71.43 53.57 26.79 Tax Rate 12% 12% 12% 12% Tax Amount 10.71 8.57 6.43 3.21 Total 100.00 80.00 60.00 30.00 Price without profiteering ought to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 01.01.2019 to 30.09.2019. vi. In response to the DGAP's Notice dated 22.10.2019 and subsequent reminders, the Respondent did not submit the complete requisite documents. Hence, summons under Section 70 of the Central Goods and Services Tax Act, 2017 read with Rule 132 of the Rules, were issued on 03.01.2020 to Sh. B Krishna Reddy, Proprietor of M/s. Krishna Enterprises, asking him to appear in the office of DGAP on 09.01.2020 and produce the relevant documents. In response to the summons dated 03.01.2020, the Respondent vide e-mail dated 09.01.2020 submitted partial documents. The Respondent submitted his replies vide letters and e-mails dated 04.11.2019, 13.11.2019, 09.01.2020, 17.01.2020 and 23.01 2020. The replies of the Respondent have been summed up as follows:- a) The Respondent has submitted that his theatre was having single screen and four classes namely (a) Balcony, (b) Dress Circle, (c) 1 st Class and (d) 2nd class. The ticket slab rates were as is furnished in Table- B :- Table- B S.No. Class Ticket Price (Inc. GST) Cost of ticket when GST was 18% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017 which governed the anti-profiteering provisions under GST stated that Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit should be passed on to the recipient by way of commensurate reduction in prices. Thus, the legal requirement was that in the event of a benefit of input tax credit or reduction in rate of tax, there must be a commensurate reduction in prices of the goods or services. Such reduction can obviously be only in terms of money, such that the final price payable by a consumer got reduced commensurate with the reduction in the tax rate which was the legally prescribed mechanism for passing on the benefit of input tax credit or reduction in rate of tax to the recipients under the GST regime and there was no other method which a supplier could adopt to pass on such benefits. From 01.01.2019, the Respondent, in terms of Section 171 of the CGST Act, 2017, was bound to maintain the Base Price of the tickets across all class of seats/slots and GST should have been charged on the pre rate reduction Base Price. xi. As regards profiteering, the DGAP has observed that there were basically four classes of tickets in the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9365 12. Total Tickets Value (including GST) L 9,36,500 13. Actual Selling price (post rate reduction) (including GST) M=L/K 100/- 14. Excess amount charged of Profiteering N=M-I 5.08/- 15. Total Profiteering O= K*N 47,5741- xii. The DGAP has claimed from the above Table- C that the Respondent did not reduce the selling prices commensurately of the Movie Tickets , when the GST rate was reduced from 18% to 12% w.e.f. 01.01.2019, vide Notification No. 27/2018 Central Tax (Rate) dated 31.12.2018 and hence profiteered an amount of Rs. 5.08/- per ticket in the Balcony class and thus the benefit of reduction in GST rate was not passed on to the recipients by way of commensurate reduction in price, in terms of Section 171 of the Central Goods and Services Tax Act, 2017. On the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disposed of the aforesaid Writ Petition directing the Respondent to submit his explanation in response to the erstwhile Authority's notice dated 06.03.2020. Accordingly, the Respondent vide his letter dated 10.04.2021 has filed his written submissions. The personal hearing in the matter was accorded to the Respondent and Applicants on 28.04.2022, 07.06.2022, 06.07.2022, 03.08.2023, 17.08.2023 and 09.11.2023. Neither the Respondent nor the Applicant No. 1 appeared in the above hearings. During the course of proceedings, the Respondent has filed his submissions dated 08.10.2020, 10.04.2021 and 16.08.2023 wherein he has inter-alia stated that:- (a) The Respondent was located in Mehdipatnam, Hyderabad and was screening films under the Licence issued by the Licensing Authority i.e. Commissioner of Police, Hyderabad and was paying the Entertainment Tax under Andhra Pradesh Entertainment Tax Act before the GST was introduced. After introduction of GST, the Respondent was paying the tax under GST Act. (b) From 01.01.2019, the Government of Telangana Central Govt. had reduced the tax rate from 28% to 18% and 18 to 12% on the rate of tickets for admission. The DGAP had issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following calculation has been given for reference:- SI. No. Class Rate of Admission GST tax 18/118% Basic Price 18/118% GST Tax 12/112% GST Tax 12/112% 1 Balcony 100 15.25 84.75 10.71 89.29 2 Second 60 9.15 50.85 6.43 53.57 3 Third Class 30 4.58 25.42 3.21 26.79 As the Difference in base price from 18/118% to 12/112% was reflecting in GST rate and no part of the benefit was related to the consumer as the rate of Admission was fixed at Rs. 80/- or Rs. 60/- or Rs. 30/- and the rate of admission was base price plus Tax amount. The benefit of difference which arose in base price would increase in the rate of Tax only and the benefit went to Government in fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2017 which governed the anti-profiteering provisions under GST which read as Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices. Thus, the legal requirement was that in the event of benefit of input tax credit or reduction in rate of tax, there must be a commensurate reduction in prices of the goods or services, Such reduction could obviously only be in absolute terms, so that the final price payable by a consumer must get reduced. This was the legally prescribed mechanism for passing on the benefit of input tax credit or reduction in rate of tax to the recipients under the GST regime. Moreover, the DGAP has submitted that the provisions of the said Section 171 of the Central Goods and Services Tax Act, 2017 were not a transitional provision wherein the benefit of reduction in rate of tax or the benefit of input tax credit was to be passed on to the recipients, only on the stock carried forward on the date of change in rate of tax, rather it covered the future supplies as well. Therefore, the contention of the Respondent that he was liable for paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tituted under any law for the time being in force, to examine whether ITC availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him. (3). The Authority referred to in sub-section (2) shall exercise such powers and discharge such functions as may be prescribed. (3A) Where the Authority referred to in sub-section (2) after holding examination as required under the said sub-section comes to the conclusion that any registered person has profiteered under sub-section (1), such person shall be liable to pay penalty equivalent to ten percent of the amount so profiteered: PROVIDED that no penalty shall be leviable if the profiteered amount is deposited within thirty days of the date of passing of the Order by the Authority. Explanation :- For the purpose of this section, the expression profiteered shall mean the amount determined on account of not passing the benefit of reduction in rate of tax on supply of goods or services or both or the benefit of input tax credit to the recipient by way of commensurate reduction in the price of the goods or s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tables 'D' above, the Respondent has profiteered by way of increasing the base prices of the tickets (Services) by not reducing the selling prices of the tickets (Services) commensurately, despite the rate reduction in GST rate on Services by way of admission to exhibition of cinematography films where price of admission ticket was one hundred rupees or less from 18% to 12% w.e.f. 01.01.2019. From the Table 'D' above, it is evident that the base prices of the admission tickets were indeed increased, as a result of which the benefit of reduction in GST rate from 18% to 12% (w.e.f. 01.01.2019), was not passed on to the recipients by way of commensurate reduction in prices charged (including lower GST @ 12%). The total amount of profiteering covering the period from 01.01.2019 to 30.09.2019, was Rs. 7,19,187/-. 10. This Commission based on the facts discussed above has found 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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