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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 totalizator, 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.
Bangalore turf club ltd. (“the Petitioner”) is carrying the business of a race club. The Petitioner particularly conducts horse racing and facilitates 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.
The Hon’ble Karnataka HC in WP No. 11168/2018 and WP No. 11167/2018 decided on June 02, 2021 held as under:
Rule 31A(3) of CGST Rules/ KGST Rules
“31A Value of supply in case of lottery, betting, gambling and horse racing
(3) The value of supply of actionable claim in the form of chance to win in betting, gambling or horse racing in a race club shall be 100% of the face value of the bet or the amount paid into the totalisator.”
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