Hyderabad Cinema Hall Failed To Pass On GST Cut Benefit To Viewers, GSTAT Delhi Upholds ₹9 Lakh Profiteering

The Principal Bench of the GST Appellate Tribunal (GSTAT) has upheld a finding against Hyderabad-based Vishwanath Cinema Hall 70MM that it profiteered by nearly ₹9 lakh after a GST rate cut on certain cinema tickets.

Judicial Member Justice Mayank Kumar Jain rejected the cinema hall's objections and accepted the findings of the Director General of Anti-Profiteering (DGAP)

According to the authority, the cinema hall profiteered ₹8.99 lakh for the period between January 1 and June 30, 2019.

The tribunal found that the cinema hall had not passed on the benefit of the tax reduction to viewers through lower ticket prices.

It also found inconsistencies in the cinema hall's submissions regarding who had the authority to determine ticket rates.

On this aspect, the tribunal held, “the increment in the base price of cinema tickets, as effected by the Respondent, is untenable and cannot be sustained in law.”

The dispute arose from a complaint alleging that the cinema hall failed to pass on the benefit of a GST rate reduction on cinema tickets priced at ₹100 or less. GST on such tickets was reduced from 18% to 12% with effect from January 1, 2019.

According to the anti-profiteering authorities, the cinema hall kept the final ticket price unchanged after the tax reduction. Instead, it increased the base price of tickets and retained the benefit of the lower tax rate.

The DGAP initially quantified the profiteered amount at about ₹6 lakh. Following a re-investigation, a supplementary report revised the figure to ₹8.99 lakh.

Before the tribunal, the cinema hall argued that ticket prices in Telangana were governed by the State's cinema laws and varied depending on the films screened. It also contended that higher rates for certain releases required approval from the competent authority.

The DGAP maintained that the obligation to pass on the benefit of the GST reduction rested on the supplier. It further pointed out that no approval permitting an increase in ticket prices during the relevant period had been produced.

Examining the record, the tribunal noted that no government order or other documentary evidence had been placed on record to show that the cinema hall was permitted to increase ticket prices during the period under investigation.

The bench also noted that the cinema hall had not challenged the methodology adopted by the DGAP or disputed the figures contained in the investigation reports.

As a result, the tribunal held that the findings, calculations, observations, and conclusions recorded by the DGAP remained uncontested.

Holding that the benefit of the GST reduction had not been passed on to consumers, the tribunal directed deposit of the profiteered amount along with interest at 18%.

Since the recipients could not be identified, 50% of the amount is to be deposited in the Central Consumer Welfare Fund and the remaining 50% in the Telangana State Consumer Welfare Fund.

No penalty was imposed because the relevant penalty provision came into force only on January 1, 2020, while the period under consideration ran from January 1, 2019 to June 30, 2019.