Illegal Profiteering through Increased Base Price on Cinema Tickets in spite of lowered GST Rates: CCI Screens Conduct of Asian GPR Multiplex [Read Order]

The Competition Commission of India ( CCI ) was recently tasked with ascertaining whether Asian GPR Multiplex, a cinema hall in Hyderabad had committed illegal profiteering by increasing the base price of their cinema tickets to counter reduction in Goods and Services Tax ( GST ) effected by Central Government Notification No.27/2018-Central Tax (Rate).

The present case was instituted by the Principal Commissioner, Medchal Commissionerate and Director General of Anti-Profiteering (DGAP) following a reference received by the Standing Committee on Anti-Profiteering by means of an Application under Section 128 of the Central Goods and Services Tax (CGST) Rules, 2017.

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The Principal Commissioner alleged that the Respondent Multiplex had denied its customers the benefit of GST rate reduction from 28% to 18% on movie admission tickets, administered by the aforementioned Notification effective from 01.01.2019.

A bare perusal of the copies of the movie tickets issued by the Respondent, revealed that the Respondent had increased the base prices on tickets for Regular Seats from Rs.117.19/- to Rs.127.12/- and from Rs.136.72/- to Rs.148.31/- from the date of effect of the Notification, i.e., 01.01.2019, up until 30.06.2019.

The DGAP upon its investigation concluded that the Respondent had failed in bestowing the GST Rate reduction benefits to its customers in violation of the mandates of Section 171 of the CGST Act, 2017.

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It was uncovered that the Respondent accumulated an amount of Rs.48,25,970/- between 01.01.2019 and 30.06.2019 through illicit profiteering activities in contravention of statutory provisions.

Submissions were made by the Respondent before the High Court of Telangana against Notice issued by the DGAP prior to initiation of proceedings against the Respondent. The Respondent’s Writ Petition was disposed of by the Telengana High Court directing the Respondent to issue a comprehensive reply to the DGAP’s Notice.

The Respondent, Asian GPR Multiplex, in its reply letter to the DGAP cited maladministration of the Authority’s statutory powers maintaining that the Standing Committee had adjudged the matter after a period of 3 months from the date of written application, in contravention to the limitation of 2 months to pass decision as per Rule 128 of the CGST Rules, 2017.

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In addition, the Respondent cited multiple decisions by numerous Courts and that of the DGAP itself to contest the applicability of Section 171 of the CGST Act, 2017 in the present case. The Respondent asserted that they had not made any changes to the Movie Ticket Base Prices since the introduction of GST in 2017, but had only done so subsequent to the enactment of the Revenue Department’s Notification.

The 4-Member Bench of the Competition Commission of India, comprising Ravneet Kaur, Chairperson, Anil Agrawal, Member, Sweta Kakkad, Member and Deepak Anurag, Member considered the contentions of both parties observed that ‘levy of GST is fixed by the GST Council, which is a Constitutional body. Benefit of rate reduction has to be meted out to the consumers by the Respondent’.

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CCI further reaffirmed that the powers vested upon the DGAP authorizes it to expand the scope of investigation to all supplies made by an entity registered under GST Laws. Additionally, Respondent’s contention that they had not increased base price right when GST was introduced was rebuked by CCI.

In conclusion, the CCI pronounced that the Respondent had violated the ‘Anti-Profiteering Measures’ under the CGST Act, 2017 and the directives of Central Government Notification No.27/2018-Central Tax (Rate).

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The CCI directed the Respondent to deposit in equal parts, the profiteered amount of Rs.48,25,970/- along with 18% interest in the Central Consumer Welfare Fund and the Telangana State Consumer Welfare Fund as per Rule 133 (c) of the CGST Rules, 2017.

The sole consolation for the Respondent came in the form of exemption from paying Penalties on its violation, owing to the insertion of the Penalty clause 3A in Section 171 of the CGST Act, 2017 on 01.01.2020, subsequent to the period of Scrutiny.

To Read the full text of the Order CLICK HERE

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