The Goods and Services Tax Appellate Tribunal (GSTAT), Principal Bench, New Delhi, has held Hotel Babylon Inn Pvt. Ltd., Raipur, guilty of profiteering by not passing on the benefit of GST rate reduction to consumers.
The bench of Justice (Retd.) Dr. Sanjaya Kumar Mishra (President) directed the hotel to deposit ₹31,28,631 along with 18% annual interest (calculated from October 1, 2019) into the Consumer Welfare Funds of the Centre and States.
The dispute arose following Notification No. 20/2019, which reduced the GST rate on hotel accommodation services effective October 1, 2019. Rooms priced above ₹7,500 per day, earlier taxed at 28%, were brought down to 18%. However, despite this tax relief, Hotel Babylon Inn allegedly kept the room tariffs unchanged, thereby denying customers the benefit of lower GST.
A complaint was first filed in February 2020 by the Principal Commissioner, Raipur, and later investigated by the Director General of Anti-Profiteering (DGAP). The DGAP’s investigation, covering October 2019 to June 2020, concluded that the hotel had indulged in profiteering amounting to over ₹31 lakh across 1,890 invoices.
The hotel argued that room tariffs varied depending on demand, seasonal factors, and operational costs. It maintained that GST was charged separately in invoices, and therefore customers automatically received the benefit of tax reduction. The management also cited the COVID-19 pandemic as a factor that increased operational costs due to heightened sanitation measures.
However, the Tribunal rejected these arguments, noting that the base prices of rooms were increased post rate reduction, effectively nullifying the GST benefit. No credible documentary evidence was produced to prove that increased tariffs were solely due to market forces or COVID-19-related costs. The plea regarding COVID-19-related expenses was termed an “afterthought” and unsupported by records.
The Tribunal emphasized that Section 171 of the CGST Act, 2017 mandates suppliers to pass on any reduction in tax rate to consumers through commensurate price reduction. Citing the Delhi High Court ruling in Reckitt Benckiser Pvt. Ltd. vs. Union of India (2024), the order reiterated that there is a presumption of profiteering when prices remain unchanged after a tax cut unless rebutted with strong evidence.
“The supplier cannot use market dynamics as a device to circumvent the statutory obligation of reducing prices in a commensurate manner,” the Tribunal observed.
The tribunal directed Hotel Babylon Inn to deposit ₹31,28,631 with 18% interest into the Consumer Welfare Funds of the Centre and States in equal proportion. The concerned Commissioner has been asked to file a compliance report within four months. Copies of the order are to be shared with the CGST and SGST Commissioners for further action.
Case Details
Case Title: DGAP Versus HOTEL BABYLON INN
Case No.: NAPA/35/PB/2025
Date: 02.09.2025
Counsel For Appellant: M.N. Verma
Counsel For Respondent: Geetika Chib
