The Competition Commission of India ( CCI ) confirmed the violation, wherein the respondent did not lower ticket prices Post-Goods and Services Tax ( GST ) rate reduction, resulting in undue Rs. 54.4 lakh profit. Consequently, the CCI ordered the entire profiteered amount be deposited along with the interest to the Consumer Welfare Fund.
The Director General of Anti-Profiteering (DGAP) reported that the respondent allegedly engaged in profiteering by increasing the base price of movie tickets to maintain the same selling price after a post-GST rate reduction, thereby failing to pass on the tax benefits to consumers. Following an investigation, the DGAP found that this practice led to an additional profit of ₹54,44,642 when the GST rate was reduced from 28% to 18%.
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The Respondent, Cinema Ventures submitted the response that the pricing of movie tickets is dynamic and influenced by various factors like movie ratings, ticket types show timings, etc., making it difficult to compare prices directly.
The respondent argued that there was no clear machinery provision in the Central Goods and Services Tax Act to calculate the impact of tax rate reductions on pricing. The respondent further submitted that the increase in base price was justified due to business losses.
The commission granted a hearing to the parties. The respondent replied through email that the National Company Law Tribunal, Mumbai had initiated a Corporate Insolvency Resolution Process (CIRP) and appointed an Interim Resolution Professional (IRP). As a result, the powers of the company’s Board of Directors were suspended, and the Commission was advised to direct any claims to the appointed Interim Resolution Professional ( IRP ).
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The Commission examined all the submissions and the arguments by the respondent. The Commission observed that there was indeed an increase in the base price of tickets when the GST rate was reduced, which resulted in not passing on the tax reduction benefits to consumers.
Even though the respondent argued that the prices were market-based, the GST rate reduction required them to reduce prices accordingly. The Commission found that the methodology used by the DGAP in calculating the profiteered amount was consistent with the legal requirements under the CGST Act. Thus, the commission confirmed the violation.
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The commission directed the respondent-company to deposit the profiteered amount of ₹54,44,642 along with an interest of 18% in the Consumer Welfare Fund and to reduce the cinema ticket price. As the respondent was undergoing insolvency proceedings, CCI directed the DGAP to file a claim for recovery of the profiteered amount within those proceedings.
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