Bangalore Turf Club Limited and ors. Vs. State of Karnataka (Karnataka High Court)
Horse race clubs liable to pay GST only on commission and not entire bet amount; Rule 31A(3) of CGST Rules ultra vires
The Hon’ble Karnataka High Court (HC) in Bangalore Turf Club Limited and ors. v. Union of India [WP No. 11168/2018 and WP No. 11167/2018 decided on June 02, 2021] held that Goods and Service Tax (GST) cannot be levied on the entire bet amount received in the totalisator as it would take away the principle that tax can only be levied on consideration received under the Central Goods and Service Tax Act, 2017 (“CGST Act”). The Court also declared Rule 31A(3) of the Central Goods and Service Tax Rules, 2017 (“CGST Rules”) and Karnataka Goods and Services Tax Rules, 2017 (KGST rules) as ultra virus of the CGST Act.
Update on 12.08.2021 : HC stays order Levying GST on commission & not on bet amount In Horse Races
Also Read: Stake money paid to horse owners not liable to TDS under section 194B or section 194BB
Facts:
Bangalore turf club ltd. (“the Petitioner”) is carrying the business of a race club. The Petitioner particularly conduct horse racing and facilities betting by the punters. The punter places the bet either through totalisator run by the Petitioner or a bookmaker licensed by the Petitioner. If the horse backed by the punter wins, the winning punter is required to surrender the receipt and receive the winning amount from the losing punter. Commission is being taken by the Petitioner for holding the entire amount.
In pre-GST regime the Petitioner was treated as service providers under Chapter-V of the Finance Act, 1994 and Service Tax was levied on the Petitioner’s commission alone. After the GST regime, an amendment was brought into Rule 31A of the CGST Act by the insertion of sub-rule (3) to Rule 31A of the CGST Rules. The amendment made GST leviable on the whole amount of bet that gets into the totalisator.
Issues:
