State-fixed Cinema ticket caps do not absolve it of liability for not passing on GST rate reduction benefits to consumers

The GST Appellate Tribunal Delhi in the case of DGAP v. Mallikarjuna Cinema Hall, 70MM Hyderabad [NAPA/3/PB/2025, order dated September 12, 2025] held that the respondent cinema's reliance on state-fixed ticket caps does not absolve it of liability for not passing on GST rate reduction benefits to consumers, reaffirming that maintenance charges are also part of the taxable value. Profiteered sums and limited interest were directed to be deposited as per law.

Facts:

Directorate General of Anti-Profiteering ("the Appellant") initiated proceedings against Mallikarjuna Cinema Hall, 70MM Hyderabad ("the Respondent") for not passing on the GST rate reduction benefits (from 28%/18% to 18%/12% w.e.f. January 1, 2019) to consumers on cinema tickets.

The Respondent cited state government maximum price fixation under the Telangana Cinemas (Regulation) Act, 1955 arguing it sold tickets at such prices with express permission from authorities and that competitive market factors influenced pricing.

The Appellant alleged unjust enrichment through base price increases after the rate reduction, quantifying profiteering at Rs. 16,50,166/- by comparing pre- and post-rate-reduction pricing using detailed ticket sales data.

The Respondent contended that prices were set as per the government's mandate, that tax-free 'maintenance charges' were wrongly included in the taxable value, and that Section 171 of the CGST Act permits consideration of commercial realities under the term "commensurate."

The Appellant argued for strict statutory construction and mandatory passing of tax benefit, refuting the 'market factors' defence, and requested deposit of the determined sum to the Consumer Welfare Fund.

The Respondent filed a writ petition in the High Court of Telangana against NAA notices, but the interim stay was vacated and the DGAP's final report submitted.

Issue:

Whether Mallikarjuna Cinema Hall profiteered by not passing on reduction in GST rates on admission tickets for cinema exhibition, and whether state maximum price rules or maintenance charges provide a valid defence under Section 171 of the CGST Act?

Held:

The GST Appellate Tribunal Delhi in NAPA/3/PB/2025 held as under:

· Observed that, GST was reduced from 28%/18% to 18%/12% from January 1, 2019 via Notification No. 27/2018-CT (Rate) dated December 31, 2018, but ticket prices were not reduced proportionately by the Respondent.

· Noted that, data in Table A and B of DGAP's report showed base price increases despite the rate cut; the Respondent did not dispute the calculation method and expressly admitted attempting to realize additional profit due to tax reduction.

· Noted that "admissions if true and clear are the best proof of fact admitted" and that here, the Respondent's admission of seeking profits sufficed as proof of profiteering.

· Noted that, although state law and government orders fix maximum price, they do not override the duty under Section 171, CGST Act to reduce prices commensurately on tax rate reductions, nor do maintenance charges per ticket escape GST liability.

· Affirmed that only the maximum and not actual pricing is regulated by state authorities, leaving discretion with cinema owners, but this cannot justify non-compliance with the central anti-profiteering law.

· Noted the decision in Reckitt Benckiser India Pvt. Ltd. . Union of India & Ors. [2024 SCC Online Del 588], confirming that Section 171 requires benefit to flow to consumers via price reduction and that any 'market factors' must be justified through cogent evidence, not used to evade statutory obligations.

· Directed the Respondents to deposit Rs. 16,50,166/- with 18% interest (on a pro-rata basis for those 3 days) split between Consumer Welfare Funds of Centre and State (with substitutionary directions if necessary) within one month; compliance report due in four months.

Our Comments:

The Tribunal strictly applied Section 171, reiterating that state-capped pricing does not override the central anti-profiteering framework, and commercial/pricing justifications without detailed cost evidence are inadequate. Reckitt Benckiser (supra) was analyzed to clarify that "commensurate" reduction means real price reduction to consumers and does not permit evasion by raising base prices or invoking non-statutory charges. Moreover, the additional charge of maintenance cost was held to be included in the ticket price, as its Central law will take precedence and GST has to be calculated on the maintenance charge which is included in the ticket price also.

Further the Tribunal examined the prospective versus retrospective nature of the amendment imposing interest on anti-profiteering amounts. It applied statutory interpretation principles and relied on the Supreme Court Constitution Bench ruling in C.I.T. (C-1) New Delhi Vs. Vatika Township Pvt. Ltd [(2015) SCC 1] regarding the presumption against retrospective operation of onerous statutes, unless clearly expressed. The Tribunal emphasized the express effective dates in the amending notifications, thus affirming the prospective application of the 18% interest provision.

Relevant Provisions:

Section 171 of the Central Goods and Services Tax Act, 2017

"171. Antiprofiteering measure.-

(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.

Provided that the Government may by notification, on the recommendations of the Council, specify the date from which the said Authority shall not accept any request for examination as to 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.

Explanation1.--For the purposes of this sub-section, "request for examination" shall mean the written application filed by an applicant requesting for examination as to 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.

Explanation 2.--For the purposes of this section, the expression "Authority" shall include the "Appellate Tribunal

(3) The Authority referred to in sub-section (2) shall exercise such powers and discharge such functions as may be prescribed.

(3A) Where the Authority referred to in sub-section (2), after holding examination as required under the said sub-section comes to the conclusion that any registered person has profiteered under sub-section (1), such person shall be liable to pay penalty equivalent to ten per cent. of the amount so profiteered:

Provided that no penalty shall be leviable if the profiteered amount is deposited within thirty days of the date of passing of the order by the Authority.

Explanation.-For the purposes of this section, the expression "profiteered" shall mean the amount determined on account of not passing the benefit of reduction in rate of tax on supply of goods or services or both or the benefit of input tax credit to the recipient by way of commensurate reduction in the price of the goods or services or both."

Notification No. 27/2018-CT (Rate) dated December 31, 2018:

GST rate reduction on cinema tickets.

(h) against serial number 34,-

(A) against item (ii) in column (3), for the entry in column (4), the entry "6" shall be substituted; (B) after item (ii) in column (3) and the entries relating thereto in columns (3), (4) and (5), the following shall be inserted, namely: - (3) (4) (5)

"(iia) Services by way of admission to exhibition of cinematograph films where price of admission ticket is above one hundred rupees. 9 -";

(C) in item (iiia), the words "exhibition of cinematograph films," shall be omitted;

Rule 133(3) of the CGST Rules, 2017

"133 (3). Where the Authority determines that a registered person has not passed on the benefit of the reduction in the rate of tax on the supply of goods or services or the benefit of input tax credit to the recipient by way of commensurate reduction in prices, the authority may order-

a. reduction in prices;

b. return to the recipient, an amount equivalent to the amount not passed on by way of commensurate reduction in prices along with interest at the rate of eighteen percent. from the date of collection of higher amount till the date of the return of such amount or recovery of the amount including interest not returned, as the case may be;

c. the deposit of an amount equivalent to fifty percent. of the amount determined under the above clause [along with interest at the rate of eighteen percent from the date of collection of the higher amount till the date of deposit of such amount] in the fund constituted under Section 57 and the remaining fifty percent. of the amount in the Fund constituted under Section 57 of the Goods and Services Tax Act, 2017 of the concerned State, where the eligible person does not claim return of the amount or is not identifiable.

d. imposition of penalty as specified under the Act; …"

Section 9A of The Telangana Cinemas (Regulation) Act, 1955.

"9-A. Penalty for black marketing in the sale of tickets for admission to cinematograph exhibition.

(1) If the owner or person in charge of a cinematograph exhibition either directly or through any other person,-

(i) sells or allows to be sold, the tickets for admission to cinematograph exhibition at any place other than the licensed under this Act; or

(ii) sells or allows to be sold, such tickets at rates higher than the maximum rates fixed therefor; or

(iii) re-sells or allows to be resold such tickets at rates higher than the maximum rates fixed therefor either at the licensed premises or elsewhere, he shall be punished with simple imprisonment for a term which may extend to three months or with fine which may extend to one thousand rupees or with both.

(2) Whoever,-

(a) with a view to re-sell at rates higher than the maximum rates fixed therefor, purchases, or keeps in his possession, the tickets for admission to Cinematograph exhibition in excess of the number normally required for use by his family members and not more than four of his guests; or

(b) sells or allows to be sold such tickets at rates higher than the maximum rates fixed therefor either at the licensed premises or elsewhere shall be punished with simple imprisonment for a term which may extend to three months or with fine which may extend to one thousand rupees or with both.

(3) Notwithstanding anything in the Code of Criminal Procedure, 1973 an offence punishable under the section shall be cognizable."

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