Relief for turf clubs as CGST rule to levy tax struck down

BENGALURU: The Karnataka High Court on Thursday struck down Rule 31A(3) of the Central Goods and Services Tax Rules, 2017, which makes turf clubs liable to pay Goods and Services Tax (GST) on the entire bet amount received by the totaliser. 

Justice M Nagaprasanna struck down sub-rule (3) which was inserted with Rule 31-A, by issuing a notification on January 23, 2018, as it is ultra vires the provisions of the CGST Act.  Allowing petitions filed by Bangalore Turf Club and Mysore Race Club Limited questioning the rule, the court said the petitioners should be entitled to all consequential benefits that flow from the aforesaid orders. 

“Sub rule (3) declares 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 at 100% face value of the bet or the amount paid into the totalisator... Making the entire bet amount that is received by the totalisator liable for payment of GST would take away the principle that a tax can be only on the basis of consideration even under the CGST,” the court said.

The petitioners have contended that Rule 31A (3) violates Article 246A, which introduced Goods and Services Act, 2017, read with Article 366 (12A) and exceeds the constitutional mandate given to Parliament and legislature to levy tax only on the principle that if there is no supply there is no tax.