Karnataka HC Stays Order Declaring Rule 31 A (3) Of CGST Rules, 2017 As Ultra Vires

Factual Background

• The case was of Union of India and Bangalore Turf Club Limited.
• The petition was filed by the Bangalore Turf Club Limited and Mysore Race Club Limited who challenged the legislative intent of making liability on entire bet amount to pay GST.
• The GST was charged on the bet money received by the totalisator.
• The Single Judge Bench had decided the petition in favour of the petitioner as a result of which this appeal has been filed.

Single Bench

• The tax is to be charged on supply of goods and services only as determined by Section 15 of the Act.
• Betting is not a business nor is in furtherance of business of race club and the amount is held only for a brief period of time and the money is distributed to the winners after the race.
• The Single Judge Bench of the Karnataka High Court had declared Rule 31A(3) of the Central Goods and Services Tax Rules, 2017 and Rule 31A of the Karnataka Goods and Services Tax Rules, 2017 to be ultra vires to the Central Goods and Services Tax Act, 2017 Act and Karnataka Goods and Services Tax Act, 2017 respectively.

Court’s Orders

• The respondents had brought to light the Supreme Court judgement where the validity of the Rule 31A (3) was upheld.
• The Division Bench admitted the appeal and stayed the order passed by the single bench.

What is your opinion of the horse race and betting on it? Do you think that they should be liable to pay taxes? Tell us in the comments section below!