GSTAT upholds anti-profiteering order against Vishwanath Cinema Hall 70MM

Background and context

The dispute in DG Anti Profiteering Vs Vishwanath Cinema Hall 70MM (GSTAT) arose from proceedings under Section 171 of the CGST Act, 2017, dealing with anti-profiteering measures. The core issue was whether the cinema operator, M/s Viswanath Cinema Hall 70MM, had failed to pass on the benefit of a reduction in GST rates on cinema admission tickets to its customers, and instead retained the same ticket prices by raising the base value of tickets.

A complaint was initiated by the Principal Commissioner, Medchal Commissionerate, alleging that the assessee did not reduce ticket prices in line with the tax rate cut effected from 01.01.2019 pursuant to Notification No. 27/2018-Central Tax (Rate) dated 31.12.2018. This notification reduced GST on:

  • “services by way of admission to exhibition of cinematography films”,
    • where price of admission ticket is one hundred rupees or less – from 18% to 12%
    • and where ticket price is above Rs. 100/- – from 28% to 18%

Despite this reduction, the assessee allegedly kept the same gross (cum-tax) ticket prices and altered only the base component, thereby retaining the tax benefit instead of passing it to viewers.

The matter was first investigated by the Director General of Anti-Profiteering (DGAP), then examined by the erstwhile Competition Commission of India (CCI) in its anti-profiteering jurisdiction, and ultimately adjudicated by the GST Appellate Tribunal (GSTAT) following constitution of the Tribunal’s Principal Bench with effect from 01.10.2024.

DGAP’s initial investigation: key findings

Scope of investigation

Acting on a reference from the Standing Committee under Rule 128 and Rule 129(1) of the CGST Rules, 2017, the DGAP issued notice to the assessee to examine whether the benefit of rate reduction had been passed on “by way of commensurate reduction in prices” as mandated under Section 171. The investigation covered the period from 01.01.2019 to 30.06.2019, with a comparative analysis against the pre-rate-reduction period in December 2018.

Ticket categories and pricing pattern

The assessee admitted that it operated multiple ticket classes, notably at:

  • Rs. 100/-, Rs. 60/-, Rs. 30/-
  • and, in different months, tickets at Rs. 80/-, Rs. 40/-, Rs. 112/-, Rs. 125/-

The DGAP examined pre- and post- rate reduction prices, particularly whether the gross selling price (inclusive of GST) changed once GST was reduced. It found that:

  1. For tickets at Rs. 100/-, Rs. 60/-, and Rs. 30/-, the gross sale price remained unchanged before and after 01.01.2019.
  2. For tickets at Rs. 80/-, Rs. 40/-, Rs. 112/- and later Rs. 125/-, the assessee continued charging the same cum-tax ticket prices despite the reduction in GST rates.

By maintaining the same gross price, the assessee effectively increased the base price portion when GST went down, thereby appropriating the tax reduction instead of transferring it to consumers.

Illustration of base price increase

The DGAP computed base prices (exclusive of tax) for both periods. For instance:

  • A Rs. 100/- ticket:
    • Before: GST @18% → base approx. Rs. 84.74
    • After: GST @12% → base raised to approx. Rs. 89.28
    • Whereas, to pass on the tax benefit, the base should have remained around Rs. 84.74, resulting in a lower ticket price of about Rs. 94.91.

Similar trends were observed across ticket categories, demonstrating that base prices had been increased post-rate reduction. Based on this pattern, the DGAP concluded that the assessee had not passed on the GST rate cut as required under Section 171, and had instead gained an undue monetary advantage.

Initial computation of profiteering

Using detailed sales data and unit-wise comparisons between:

  • Actual base price + GST charged, and
  • Commensurate base price + GST that should have been charged,

the DGAP initially quantified total profiteering at Rs. 6,00,934/- for the period 01.01.2019 to 30.06.2019. This figure included excess base price and excess GST charged from viewers.

The report under Rule 129(6) was accordingly submitted to the CCI, which at that time was the empowered authority under anti-profiteering provisions (by virtue of Notification No. 23/2022-Central Tax dated 23.11.2022).

CCI’s directions for re-investigation

On considering the first report, the CCI noticed certain issues requiring clarification and ordered re-investigation under Rule 129(c) of the CGST Rules, 2017 on 14.03.2024. The DGAP was directed to re-examine:

  1. Short payment of GST:
    There appeared to be instances where GST had been paid at a lower rate than applicable, particularly for tickets priced above Rs. 100/- before and after the reduction, which in turn impacted both the tax compliance and profiteering computation.

  2. Turnover mismatch:

    • Jurisdictional Commissionerate computed ticket sales turnover at Rs. 1,05,62,373/-
    • GSTR-3B declared outward supplies of Rs. 1,46,63,004/-
      The significant variance required reconciliation as it could affect the accuracy of profiteering quantification.