GSTAT Upholds Anti-Profiteering Order Against Hyderabad Cinema Hall for Not Passing GST Rate Cut Benefit to Moviegoers

The Goods and Services Tax Appellate Tribunal (GSTAT), Principal Bench, upheld the findings of the Director General of Anti-Profiteering (DGAP) against Vishwanath Cinema Hall 70MM, Hyderabad, holding that the theatre failed to pass on the benefit of the GST rate reduction on cinema tickets to customers. The Tribunal directed the cinema hall to deposit Rs 8.99 lakh, along with 18% interest, into the Consumer Welfare Fund after concluding that it had increased the base ticket prices instead of reducing ticket prices following the GST rate cut.

The dispute arose after GST on cinema tickets priced at Rs 100 or less was reduced from 18% to 12%, and GST on tickets priced above Rs 100 was reduced from 28% to 18% with effect from 1 January 2019. A complaint was filed alleging that despite the tax reduction, the cinema hall continued charging the same ticket prices and merely increased the base value of the tickets, thereby retaining the tax benefit instead of passing it on to viewers.

During the investigation, the DGAP examined ticket sales between 1 January 2019 and 30 June 2019 and found that ticket prices remained unchanged at various slabs such as Rs 30, Rs 40, Rs 60, Rs 80, Rs 100, Rs 112 and Rs 125. However, because GST rates had fallen, the base prices should have reduced proportionately. Instead, the cinema hall increased the base prices, resulting in excess collections from customers. The DGAP initially quantified profiteering at Rs 6 lakh and, after further investigation directed by the Competition Commission of India, revised the profiteered amount to Rs 8.99 lakh.

The cinema hall defended its actions by contending that ticket prices in Telangana are regulated under cinema laws and that any increase or decrease in ticket rates requires approval from the licensing authorities or courts. It further argued that ticket rates often vary depending on the movie being screened and permissions granted for special releases.

Relying on Section 171 of the CGST Act, 2017, and the Telangana High Court’s ruling in Sudarshan Theatre 35MM v. Union of India, the Tribunal reiterated that whenever GST rates are reduced, suppliers must pass the benefit to consumers through a commensurate reduction in prices. Maintaining the same ticket price after a tax cut effectively amounts to profiteering.

The Tribunal also observed that the respondent had not challenged the methodology or calculations adopted by the DGAP and therefore the findings remained largely undisputed. It further relied on its earlier decision in DGAP v. Mallikarjuna Cinema Hall, 70MM Hyderabad, which had taken a similar view regarding cinema ticket pricing and anti-profiteering obligations.

Thus, GSTAT accepted the DGAP’s reports, rejected the objections raised by the cinema hall, and directed it to deposit the profiteered amount of Rs 8,99,273 along with interest at 18%. Since the recipients of the services could not be individually identified, 50% of the amount was directed to be deposited in the Central Consumer Welfare Fund and the remaining 50% in the Telangana State Consumer Welfare Fund. However, no penalty was imposed because the relevant penalty provisions came into force only from 1 January 2020, whereas the profiteering period involved was from 1 January 2019 to 30 June 2019.

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