Prize money/stakes on Horse racing will not be subject to GST as not consider as supply under Section 7(1)(a) of Central Goods and Services Tax Act, 2017 and Applicant-respondent is not eligible to avail ITC in respect of any input supply – Maharashtra AAAR

M/s Vijay Baburao Shirke [ORDER NO. MAH/AAAR/RS-SK/23/2020-21 (App. A.A.R. – GST – Maharashtra)]

Facts- M/s. Vijay Baburao Shirke (hereinafter referred to as the “respondent”) is a proprietorship firm with GSTIN Number 27ACMPS4462Q1ZM and registered address at 72-76, Industrial Estate, Mundhwa, Pune, Maharashtra-411036. He inter alia owns horses and is engaged in participation of horse races organized by the Royal Western India Turf Club (RWITC) located in Mumbai/Pune and also by the other race clubs in India. The RWITC charged and paid service tax on the Entry Fees recovered from the horse owners and sponsorship amount. Once the race is completed and the result is declared, the prize money/stakes is credited to the account of Owners/Trainers/Jockeys.

Mr. Vijay Baburao Shirke made an advance ruling application dated 23-4-2019 before the Maharashtra Authority for Advance Ruling, on the issue of whether receipt of prize money from horse race conducting entities, in the event where the horse owned by the applicant wins the race, would amount to ‘supply’ under Section 7 of the Central Goods and Services Tax Act, 2017 or not and consequently, liable to GST or not. The AAR, vide their order dated 4-10-2019, held that prize money received in horse races was covered under ‘supply’ under Section 7 of CGST Act, 2017, and accordingly would be subject to GST at rate of 18% (CGST @ 9% + SGST @ 9%).

Aggrieved by the said Order of the AAR, the present appeal is being filed under Section 100 of the CGST Act, 2017, with the Appellate Authority for Advance Ruling, seeking to quash the aforesaid Advance Ruling Order holding it void ab initio in terms of Section 101 as well as Section 104 of the CGST Act, 2017.

Held-  The App. A.A.R after considering the facts held that “Supply” as envisaged under Section 7(1)(a) of the CGST Act, 2017, should essentially and invariably have the following ingredients :

 (i) There should be a supply of goods or services or both;

(ii) It should be for a consideration;

(iii) It should be in the course or furtherance of business. 

By applying the above definition of “supply” to the facts and circumstances of the case at hand, it is observed that no service has been provided by the applicant-respondent to the racing clubs for the prize money/stakes received from such clubs, as it is not in dispute that not all horse owners, who agree to provide their horses to such race organising clubs, get this consideration in the form of the said prize money/stake from such clubs. Only those horse owners receive these considerations whose horses win the races organized by such clubs. Thus, there is no direct nexus between the activities carried out by the horse owners. Participation of the race horses in the races and winning by such races are two separate events/transactions. It is clear from the issue that in the first transaction, i.e. getting the opportunity to participate in such races organised by the horse racing clubs against the entry fee payable by the horse race owners to such clubs is a supply of service by the race conducting entity to such aspiring race horse owners. However, we fail to see any element of service when the applicant’s horses win the race and get the prize.

The applicant-respondent had contended that they provide service to the Club and that the contract is a conditional contract and therefore there is supply. The applicant-respondent has argued there may be a conditional contract here and we might assume that for the moment. But not every contract becomes taxable under the CGST law. Every supply is a contract but not every contract is a supply. In order to levy tax under the CGST Act there should be supply of goods/service and there should be consideration. We have already delineated in detail as to how there is no service provided in the present case and therefore the argument of the appellant is not acceptable.

The A.A.A.R. set aside the advance ruling issued by AAR, and hold that prize money/stakes will not be subject to GST in the absence of any supply, as discussed above. Accordingly, the applicant-respondent is also not entitled to avail any ITC in accordance with the provisions of Section 17(2) of the CGST Act, 2017 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.

To read the complete judgment 2020 Taxo.online 1057