The Maharashtra Appellate Authority of Advance Ruling (AAAR) in its recent ruling on the application filed by Vijay B. Shirke, while rejecting the AAR ruling, has held that GST is not applicable on Prize Money / stakes from horse race in absence of supply. It has further been held that Appellant will not be entitled to avail any ITC in accordance with the provisions of Section 17(2) of the CGST Act, 2017.
We have in this article attempted to summarize the 44 page order for benefit of our readers. Further for ready reference the order is also given at end of article which can be easily read / downloaded.
Facts of the Case:
The applicant Vijay B. Shirke is duly registered with the Goods and Service Tax Department. The Applicant owns horses. The horses owned by the applicant participate in races organized at different clubs. The horse races take place at Royal Western India Turf Club (RWITC) located in Mumbai and Pune.
The applicant also participates in horse races held in Mysore Race Club, Bangalore Turf Club, Hyderabad Race Club, Royal Calcutta Turf Club and Madras Race Club. Upon winning such horse races, the applicant is awarded with prize money in respect of horses, which win the race.
In the year 2012, when the Service Tax was introduced, Royal Western Turf Club Ltd. (RWITC) Mumbai issued a letter to Western India Race Horse Owners Association Ltd., in which RWITC informed the horse owners that the amount of stake or prize money received by the owners is covered under Service Tax.
Accordingly, the applicant paid the service tax at the applicable rate till June 2017. As the definition of service under the Service Tax Act is identical in the GST, the applicant continued to pay the GST under the GST Act.
Issue on which Ruling was sought:
The applicant sought advance ruling on the issue whether receipt of prize money from horse race conducting entities, in the event horse owned by the applicant wins the race, would amount to ‘supply under section 7 of the CGST Act, 2017 or not and consequently, liable to GST or not.
Ruling of Maharashtra AAR:
The AAR ruled that the amount of prize money received from the events conducting entities would be covered under ‘supply under section 7 of the CGST Act, 2017 and consequently, it is held as a taxable supply of services and liable to GST at the rate of 18% (9% each of CGST and SGST).
Aggrieved by the order of AAR, appeal has been filed by Applicant before Maharashtra AAAR under Section 100 of the CGST Act, 2017 to quash the advance ruling order.
Contention of the Appellant before AAAR:
The appellant submitted that participation of the owners in horse race is not a service rendered to RWITC and the prize money / stakes is not ‘consideration’ paid to the owners by RWITC for provision of any services; that this activity does not fall under clause (a) of Section 7(1) of the CGST Act, 2017 and thus is not a supply.
Liability to pay GST would arise only where the payment received will be linked to supply. In case of race , the award is received for an achievement carried out independently . The payment of prize money is to recognize the achievement carried out independently . The payment of prize money is to recognize the achievement , it cannot be construed as consideration towards a ‘supply’. Therefore GST liability will not arise on same.
Order of Maharashtra AAAR: Deliberations and Ruling:
- For the occurrence of any taxable event, there must be direct and immediate link between the supply made and consideration received. In present facts and circumstances, this clause of direct and immediate link between supply and consideration is absolutely absent in the present situation.
- Input tax credit is restricted to the portion of taxable supplies only. Therefore, in the present case, the Appellant will not be eligible to avail ITC in respect of any input supply including the entry fee, the training charges paid to the horse trainers and the charges paid to the jockeys, etc.
In view of above deliberations the Maharashtra AAAR consisting of Sanjeev Kumar and Rajesh Kumar Sharma set aside the AAR’s order and held that prize money / stakes will not be subject to GST in absence of any supply. Accordingly the Appellant will not be entitled to avail any ITC in accordance with the provisions of Section 17(2) of the CGST Act, 2017.
READ / DOWNLOAD ORDER:
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
