Multiplex Chain PVR Found Guilty Of Profiteering, But Escapes Penalty

The goods and services tax (GST) profiteering watchdog has held multiplex chain PVR guilty of not passing on the benefit of lower GST rates to consumers. However, it has decided against imposing any penalty. This is because PVR, Telangana, voluntarily deposited Rs 13.72 lakh along with interest worth Rs 35,800 to the consumer welfare fund, in compliance with the anti-profiteering rules under GST.

According to the complaint, PVR did not pass on the benefit of reduction when GST rates were reduced from 28 per cent to 18 per cent with effect from January 1, 2019 and ticket prices remained unchanged. The tickets, priced at Rs 250, Rs 200 and Rs 150, were sold at the same price prior to and after the GST rate reduction as the multiplex chain increased their base price.

The GST Council had decided to lower GST rates on cinema tickets to 12 per cent from 18 per cent for those priced at up to Rs 100 and cut rates from 28 per cent to 18 per cent for tickets priced above Rs 100.

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According to the anti-profiteering rules under GST, “Benefits of input tax credit should have been passed on to the recipient by way of commensurate reduction in prices.”

PVR reduced ticket prices after January 7, 2019, as it was seeking clarity from the licensing authority over the fixed admission ticket price and deposited the differential to the consumer welfare fund.

Abhishek A Rastogi, partner, Khaitan & Co said that profiteering was a consequence of the rate reduction and only few businesses reduced the ticket price on time. “This industry issue needs attention as one wrong decision could have a multiplier effect on different players and multiple locations”, he said. Rastogi added that in the absence of a methodology, the constitutional validity must be argued so that even this sector gets heard on the legal grounds.

The anti-profiteering mechanism is a three-stage process. There is a state-level screening committee for local complaints and a standing committee for national-level complaints. This is followed by an investigation by the directorate general of anti-profiteering and a probe by the decision-making body, the NAA.