Finding that Tata Play (respondent) has not passed the benefit accrued due to introduction of GST, the New Delhi Principal Bench of the Goods and Services Tax Appellate Tribunal (GSTAT) has clarified that a net tax benefit accrued to the respondent post-GST due to subsummation of various taxes and availability of increased ITC & such benefit of GST introduction was not passed on to the consumers. Therefore, profiteering of Rs 450.18 crore stands established, and the GSTAT directed the Respondent to deposit Rs. 450.18 crores in the Central Consumer Welfare Fund as well as in the State Consumer Welfare Funds in the ratio of 50:50 equally, within three months.
The Tribunal noted that with introduction of GST, effective tax burden on DTH services reduced by eliminating Entertainment Tax and other cascading levies, thereby enabling uniform taxation with ITC. Respondent ‘s contentions of Service Tax rate increase on DTH services is irrelevant, as the Respondent has not considered the benefit available with the introduction of GST especially subsummation entertainment tax, VAT and other levies.
Thus, the determination under Section 171 is not confined to a simplistic comparison of main tax rates, but requires examination of the total indirect tax burden before and after the introduction of GST. Viewed in totality, subsumption of Entertainment Tax and Service Tax post-GST, demonstrate reduction in effective output tax burden, added the Tribunal.
The Division Bench comprising Justice (Retd.) Dr. Sanjaya Kumar Mishra (President) and A. Venu Prasad (Technical Member) observed that it is clear with the introduction of GST, the effective tax burden on DTH services reduced by eliminating Entertainment Tax and other cascading levies, bringing uniform taxation with seamless Input tax credit. In overall. GST benefitted the industry and consumers. Hence, the contention of the Respondent that increase of service tax from 15% to 18% of GST is not valid.
The Bench opined that the Respondent has not considered the benefit available with the introduction of GST especially subsummation entertainment tax, VAT and other levies as mentioned in the previous paras. The determination under Section 171 is not confined to a simplistic comparison of main tax rates, but requires examination of the total indirect tax burden before and after the introduction of GST. When viewed in totality, the subsumption of Entertainment Tax and Service Tax post-GST unmistakably demonstrate a reduction in the effective output tax burden.
The Bench explained that the benefit of subsummation of various taxes and levies, is based on statutory merger of taxes and not on whether a particular levy was collected by a dealer or not. Once a tax stand subsumed by law, its prior non-collection does not justify denial of GST impact benefits to subsequently to consumers. Once a levy is subsumed under GST, States and dealers, lose power to impose or revive such taxes irrespective of historical collection by them.
Moving ahead, the Bench observed that the fiscal benefits under GST cannot be denied on hypothetical or nonenforced or non-collection of taxes before introduction of GST. Further, subsummation under GST is constitutional and automatic, not conditional upon earlier enforcement. Thus, post-GST, States cannot impose Entertainment Tax on services such as DTH once subsumed in GST framework, and any demand must strictly relate to pre-GST period and only if legally liable.
Non-collection of Entertainment Tax earlier does not prevent the taxing power post GST, and taxation follows legislative competence, not historical enforcement. Therefore, the argument of Respondent that Tata Sky has not collected entertainment tax from the customers is not valid as per law, added the Bench.
The Bench went on to found that the taxpayer charged Rs 3290 for six-month period as DTH subscription prior to GST inclusive of all levies and taxes, and multiple indirect taxes including Service Tax and statutorily leviable Entertainment Tax stood subsumed under GST. However, post-GST, despite reduction in effective tax burden to 18%, the assessed continued charging Rs 3290 inclusive of all taxes for six months plus GST.
Further, the Bench noted that the entertainment tax is a statutory levy on the act of providing entertainment. The obligation to pay tax arises from the statute itself and is not contingent upon recovery from customers, and the failure to collect tax is a commercial lapse and cannot defeat statutory liability. Entertainment Tax to the Government even where such tax was not reflected as a separate line item on the invoices, it would necessarily have been embedded in the subscription price recovered from consumers.
Lastly, the Bench concluded that the operators are liable to discharge the full tax liability for the relevant period, even if the tax was not collected from subscribers. Accordingly, non-collection of entertainment tax does not extinguish the liability, and the assesses remains liable to pay the full amount of tax, along with applicable interest and penalties, subject only to statutory limitations or specific court orders.
Briefly, the DGAP alleged profiteering of Rs 450.18 crores by the Respondent, M/s Tata Play Limited, engaged in providing Direct-to-Home (DTH) television broadcasting services. The proceedings originated from a consumer complaint filed by Ms. Sweety Agarwal alleging that the Respondent charged identical subscription prices in the pre-GST and post-GST periods and failed to pass on the benefit of reduced tax incidence and additional input tax credit (ITC) available after implementation of GST. The Standing Committee on Anti-Profiteering referred the matter to DGAP for investigation under Rule 129.
The issues for determination included whether subsummation of Service Tax, VAT, Entertainment Tax and other levies into GST reduced the effective tax incidence on DTH services, whether the Respondent ‘s claim of non-collection of Entertainment Tax in the pre-GST period negated any benefit, whether maintaining the same base subscription price before and after GST amounted to retention of tax benefit and profiteering, whether such benefit was required to be passed on to subscribers u/s 171 of the CGST Act, and if so, the quantum of profiteering and consequential relief.
The DGAP investigated the period using the methodology under Rule 126, which involved comparing the effective tax incidence and availability of ITC in the pre-GST and post-GST periods. It found that prior to GST the Respondent paid Service Tax, VAT, Entertainment Tax and other levies without seamless credit, whereas after GST these taxes were subsumed and additional ITC became available, resulting in a reduction in effective tax incidence, though subscription prices were not reduced proportionately.
Thus, the DGAP determined that ITC as a percentage of turnover increased from 10.86% during 01.04.2016 to 30.06.2017 to 15.05% during 01.07.2017 to 31.01.2019, indicating an additional ITC benefit of 4.19% which should have been passed on to subscribers, and accordingly quantified profiteering at Rs 450,18,07,258. After issuance of notice and exchange of submissions between the Respondent and DGAP, the National Anti-Profiteering Authority, (NAA) confirmed the profiteering amount and directed the Respondent to deposit Rs 450.18 Crores along with interest at 18% from the date of profiteering till deposit in the Central and State Consumer Welfare Funds as per Rule 133(3)(b) of the CGST Rules, 2017.
Appearances:
Assistant Commissioner, Harkesh Meena along with Additional Assistant Directors Praveen Kumar, and Ajay Tehlan, on behalf of the DGAP/ Revenue
Senior Advocate Rohan Shah, along with Advocates Deepak Thackur, Aakansha Wadhwani, and Muhammad Anajwalla, on the behalf of the Respondent/ Taxpayer
