Case Name : Rahul Sharma v/s Cinema Ventures (P.) Ltd. ( COMPETITION COMMISSION OF INDIA) :
Case Name : Rahul Sharma v/s Cinema Ventures (P.) Ltd.
( COMPETITION COMMISSION OF INDIA) :
ORDER DATE : 10-07-2024
Background: Cinema Ventures (P.) Ltd. was accused of not passing on the benefit of a reduced GST rate to customers for services related to admission to cinema films. The GST rate for these services was reduced from 28% to 18% effective January 1, 2019, as per Notification No. 27/2018-Central Tax (Rate) dated December 31, 2018. Despite this reduction, Cinema Ventures allegedly maintained the same ticket prices without reducing them to reflect the lower tax rate.
Key Points:
- Allegation: Rahul Sharma filed a complaint with the Competition Commission of India (CCI) under Rule 128, claiming Cinema Ventures engaged in profiteering. He alleged that despite the GST rate reduction, Cinema Ventures did not lower its ticket prices accordingly, thereby profiteering from the reduction in tax rates.
- Investigation Findings: The Director General of Anti-Profiteering (DGAP) investigated the matter and found merit in the allegation. The DGAP reported that Cinema Ventures did not reduce the price of admission tickets commensurately with the GST rate reduction from 28% to 18%.
- Commission Decision: The CCI, chaired by Smt. Ravneet Kaur, along with other members, reviewed the findings and concluded that Cinema Ventures had indeed engaged in profiteering. The company either increased the base price of the service while maintaining the same selling price or failed to reduce the selling price of tickets despite the GST rate cut.
- Outcome: As per Rule 133 (1) of the CGST Rules, 2017, the CCI directed Cinema Ventures to deposit the profiteered amount of Rs. 54,44,642/- along with interest. The interest was calculated at 18% from the date Cinema Ventures collected the excess amount from customers until the amount was deposited.
Simplified Explanation:
Cinema Ventures (P.) Ltd. did not lower its ticket prices despite a reduction in GST rates on cinema ticket admissions from 28% to 18% starting January 1, 2019. This meant that while the tax burden on customers decreased, Cinema Ventures continued to charge the same prices, effectively profiting from the tax rate reduction. The Competition Commission of India found this practice unfair under Section 171 of the CGST Act, which mandates passing on benefits of tax reductions to consumers. As a result, Cinema Ventures was ordered to repay the excess amount collected, totaling Rs. 54,44,642/-, plus interest calculated at 18% per annum from the collection date to the date of deposit.
Relevant Section – 171 of CGST Act
Section 171. (1) Any reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices. (2) The Central Government may, on recommendations of the Council, by notification, constitute an Authority, or empower an existing Authority constituted under any law for the time being in force, to examine whether input tax credits availed by any registered person or the reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or services or both supplied by him.