GSTAT Finds Hotel Guilty of Profiteering on Tax Rate Cut

Case Details: DGAP vs. Hotel Babylon Inn - [2025] 178 taxmann.com 145 (GSTAT - NEW DELHI)

Judiciary and Counsel Details

• Dr Sanjaya Kumar Mishra, President
• Ms Geetika Chib, Additional Assistant Director & Awanindra Kumar, Inspector for the Appellant
• M.N. Verma, Consultant for the Respondent

Facts of the Case

A hotel service provider supplied hotel accommodation services. Following reduction of GST rate on hotel accommodation services vide Notification No. 20/2019-Central Tax (Rate), dated 30-09-2019, it was alleged that the benefit of the rate reduction was not passed on to consumers, as prices of such services remained unchanged due to an increase in the base price. The service provider contended that during Covid 19, room rates were increased to account for additional costs incurred, which were included in the room rent. The Directorate General of Anti-Profiteering (DGAP) calculated the total amount of profiteering to be Rs. 31.28 lakhs. The legal issue arising was whether there was profiteering under Section 171 by denying consumers the benefit of the tax rate reduction. The matter was accordingly placed before GST Appellate Tribunal (GSTAT).

High Court Held

The GSTAT held that profiteering occurred as the benefit of GST rate reduction was not passed on to consumers and the base price of hotel accommodation services was increased. It was noted that during Covid 19, the hospitality industry experienced shutdowns, and even considering market dynamics, prices could not be deemed to have risen for the relevant period. The Tribunal observed that market dynamics could not be used as a device to circumvent the statutory obligation of reducing pricing in a commensurate manner. No cogent materials, evidences, or documents were produced to rebut the presumption of profiteering. Consequently, an amount of Rs. 31.28 lakhs along with interest at the rate of 18 per cent was directed to be deposited in the Consumer Welfare Fund.

List of Cases Referred to

• Reckitt Benckiser India (P.) Ltd. v. Union of India [2024] 158 taxmann.com 675/102 GST 495/82 GSTL 344 (Delhi) (para 16).