GSTAT Orders Hotel Babylon Inn to Deposit Rs. 31.28 Lakh for Profiteering Under Section 171 CGST Act:

GSTAT Orders Hotel Babylon Inn to Deposit Rs. 31.28 Lakh for Profiteering Under Section 171 CGST Act The Director General of Anti-Profiteering (DGAP) initiated proceedings against the assessee for not passing on the benefit of the GST rate reduction to consumers. The hotel continued to charge the same prices despite the reduction in GST rates from 28% to 18% on accommodation services, as notified under Notification No. 20/2019-Central Tax (Rate) dated 30.09.2019, effective from 01.10.2019. The Principal Commissioner filed a complaint, and thereafter the DGAP conducted an investigation and found that the hotel had raised the base price of rooms after the GST rate reduction, as a result the benefit meant for the customers was nullified.  The total profiteering amount was determined at Rs. 31,28,631, covering the period from 01.10.2019 to 30.06.2020. Main Issue: Whether Hotel Babylon Inn Pvt. Ltd. failed to pass on the benefit of a reduction in the rate of GST on hotel accommodation services to consumers, thereby indulging in profiteering under Section 171 of the CGST Act, 2017. GSTAT Held: The Goods and Services Tax Appellate Tribunal (GSTAT) upheld the DGAP’s findings. The Tribunal held that the hotel had profited by charging higher base prices, although the tax rate was reduced. The reasoning given by assessee hotel that market dynamics and seasonal factors influenced pricing was rejected, as no evidence was provided to justify such increases. The Tribunal also noted that the plea of increased costs due to COVID-19 was an afterthought and was unsupported by any material proof. Citing the High Court’s decision in Reckitt Benckiser Pvt. Ltd. v. Union of India, the Bench reiterated that there exists a rebuttable presumption of profiteering whenever tax rates are reduced but prices are not commensurately lowered. Therefore, the Tribunal ordered the respondent to deposit Rs. 31,28,631 along with 18% annual interest (from 01.10.2019 till realisation) into the Consumer Welfare Fund, equally shared between the Centre and the State. To Read Full Judgment, Download PDF Given Below