No GST applicable on Prize Money / stakes in absence of Supply: AAAR [Read Order]

The Maharashtra Appellate Authority of Advance Ruling (AAAR) while rejecting the AAR ruling held that no GST applicable on Prize Money/ stakes in absence of supply.

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.

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 Central Goods and Service Tax Act, 2017 or not and consequently, liable to GST or not.

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).

However, the AAAR consisting of Sanjeev Kumar and Rajesh Kumar Sharma while setting aside the AAR’s order held that input tax credit is restricted to the portion of taxable supplies only.

Therefore, the AAAR held that in the present case, the Applicant-Respondent 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.