Failure to Pass on GST Rate Reduction on Movie Tickets Amounts to Profiteering: GSTAT upholds ₹16.50 Lakh Liability [Read Order]
GSTAT held that Mallikarjuna Cinema Hall profiteered ₹16.50 lakh by raising base ticket prices instead of passing on the GST rate reduction benefit to moviegoers.
![Failure to Pass on GST Rate Reduction on Movie Tickets Amounts to Profiteering: GSTAT upholds ₹16.50 Lakh Liability [Read Order]](https://images.taxscan.in/h-upload/2025/11/10/2103885-supreme-court-entertainment-tax-supreme-court-on-entertainment-tax-entertainment-tax-on-cinema-tickets-.webp "Failure to Pass on GST Rate Reduction on Movie Tickets Amounts to Profiteering: GSTAT upholds ₹16.50 Lakh Liability [Read Order]")
In a recent ruling, the Principal Bench of the Goods and Services Tax Appellate Tribunal (GSTAT) at New Delhi held that Mallikarjuna Cinema Hall profiteered Rs. 16,50,166 by not passing on the benefit of GST rate reduction on movie tickets to consumers.
The case arose under Section 171 of the Central Goods and Services Tax Act, 2017, which deals with anti-profiteering. The GST rate on cinema tickets was reduced with effect from 1 January 2019 by Notification No. 27/2018-Central Tax (Rate). Tickets priced above Rs. 100 became taxable at 18% instead of 28%, and tickets up to Rs. 100 were taxed at 12% instead of 18%.
The Definitive GST Guide for Today’s Tax Landscape! Click here
Based on a complaint from the Principal Commissioner, Medchal Commissionerate, Hyderabad, the Directorate General of Anti-Profiteering (DGAP) investigated and found that the cinema increased its base ticket prices after the tax reduction and retained the benefit meant for customers. The profiteering for the period 1 January to 30 June 2019 was computed at Rs. 16,50,166.
The respondent’s counsel argued that ticket prices were fixed under the Telangana Cinemas (Regulation) Act, 1955 and approved by the State Government. They also argued that Rs. 3 per ticket collected as maintenance charges was permitted under state law and should not have been included in the taxable value.
The counsel added that the word “commensurate” in Section 171 allows businesses to consider inflation and other commercial factors while deciding prices. On interest, it was submitted that the 18% interest clause in Rule 133(3)(c) came into effect only on 28 June 2019, and could not apply to earlier transactions.
Justice (Retd.) Dr. Sanjaya Kumar Mishra (President of GSTAT) observed that the DGAP’s calculations were correct and undisputed. The tribunal pointed out that the respondent had admitted to increasing prices to earn extra profit, which was a clear case of profiteering.
The tribunal explained that Section 171 ensures the benefit of tax reduction reaches consumers, and that the Telangana Government’s orders fixed only the maximum ticket prices, not mandatory rates. It further observed that the Rs. 3 maintenance charge must be taxed as part of the ticket price.
On interest, the tribunal explained that the 18% levy applied prospectively from 28 June 2019, following the Supreme Court’s ruling in CIT v. Vatika Township Pvt. Ltd. (2015). Accordingly, interest was imposed only for three days (28-30 June 2019).
The tribunal held that the cinema profiteered Rs. 16,50,166 and directed it to deposit the amount along with 18% interest on Rs. 27,350 in equal parts into the Consumer Welfare Funds of the Centre and the State of Telangana, with compliance to be reported within four months.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
