Bangalore Turf Club Limited vs The State Of Karnataka on

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    Karnataka High Court

    Bangalore Turf Club Limited vs The State Of Karnataka on 2 June, 2021

    Author: M.Nagaprasanna

    1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 02ND DAY OF JUNE, 2021 R BEFORE THE HON’BLE MR. JUSTICE M. NAGAPRASANNA WRIT PETITION No.11168/2018 (T – RES) C/W WRIT PETITION No.11167/2018 (T – RES) IN WRIT PETITION No.11168/2018 BETWEEN BANGALORE TURF CLUB LIMITED GSTIN 29AABCB6217G1ZT RACE COURSE ROAD, BENGALURU – 560 001. REPRESENTED BY ITS SECRETARY AND CFO SRI PRADEEP KUMAR, AGED ABOUT 41 YEARS, S/O SRI GUNDERAO KULKARNI, RESIDING AT FF6, SURYA PARK VIEW APARTMENTS, 17TH CROSS, IDEAL HOMES TOWNSHIP, RAJARAJESHWARI NAGAR, BENGALURU – 560 098. … PETITIONER (BY SRI VIVEK REDDY K., SENIOR COUNSEL FOR SRI ATUL K. ALUR, ADVOCATES (VIDEO CONFERENCING)) AND 1. THE STATE OF KARNATAKA REPRESENTED BY 2 THE PRINCIPAL SECRETARY FINANCE DEPARTMENT, GOVERNMENT OF KARNATAKA, BENGALURU – 560 001. 2. THE UNION OF INDIA REPRESENTED HEREIN BY THE SECRETARY, GOVERNMENT OF INDIA, NEW DELHI – 110 006. 3. ASST. COMMISSIONER OF CENTRAL TAX BENGALURU NORTH DIVISION, CRESCENT ROAD, BENGALURU – 560 001. … RESPONDENTS (BY SRI VIKRAM HUILGOL, AGA FOR R1 (VIDEO CONFERENCING); SMT.M.R.VANAJA, CGSC FOR R2 AND R3 (VIDEO CONFERENCING)) THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO DECLARE THAT THE PETITIONER, BASED ON THE LEGISLATIVE INTENT IS LIABLE TO PAY GST ONLY ON THE COMMISSION SET APART AND THEREFORE, DECLARE THAT THE CLARIFICATION / CIRCULAR DATED 04.01.2018 AT ANNEX-A ARE UNSUSTAINABLE AND BE QUASHED AND ETC., IN WRIT PETITION No.11167/2018 BETWEEN MYSORE RACE CLUB LIMITED GSTIN 29AABCM5167G1ZB RACE COURSE ROAD, 3 MYSURU – 570 010 REPRESENTED BY ITS SECRETARY SRI K.G. ANANTHARAJ URS AGED ABOUT 66 YEARS, SON OF LATE G.GOPALARAJ URS RESIDING AT 190, NYAYA MARG, SIDDHARTH NAGAR, MYSURU – 570 011. … PETITIONER (BY SRI VIVEK REDDY K., SENIOR COUNSEL FOR SRI ATUL K. ALUR, ADVOCATES (VIDEO CONFERENCING)) AND 1. THE STATE OF KARNATAKA REPRESENTED BY THE PRINCIPAL SECRETARY FINANCE DEPARTMENT GOVERNMENT OF KARNATAKA BENGALURU – 560 001. 2. THE UNION OF INDIA REPRESENTED HEREIN BY THE SECRETARY, GOVERNMENT OF INDIA, NEW DELHI – 110 006. 3. ASST. COMMISSIONER OF CENTRAL TAX ITTIGEGUD, SIDDHARTHNAGAR DIVISION, MYSURU – 570 010. … RESPONDENTS (BY SRI VIKRAM HUILGOL, AGA FOR R1 (VIDEO CONFERENCING); SMT.M.R.VANAJA, CGSC FOR R2 AND R3 (VIDEO CONFERENCING)) 4 THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO DECLARE THAT THE PETITIONER, BASED ON THE LEGISLATIVE INTENT IS LIABLE TO PAY GST ONLY ON THE COMMISSION SET APART AND THEREFORE, DECLARE THAT THE CLARIFICATION / CIRCULAR NO.27/01/2018-GST DATED 4TH JANUARY 2018 ANNEXURE-A ARE UNSUSTAINABLE AND BE QUASHED AND ETC., THESE WRIT PETITIONS HAVING BEEN HEARD AND RESERVED FOR ORDERS ON 26.02.2021, COMING ON FOR PRONOUNCEMENT THIS DAY, THE COURT MADE THE FOLLOWING :- ORDER

    The petitioners in these writ petitions inter alia challenge the legislative intent of making the petitioners liable to pay Goods and Services Tax (‘GST’ for short) on the entire bet amount received by the totalisator and declare the amendments dated 25-01-2018 which inserted Rule 31A(3) to the CGST Rules as being ultra vires the CGST Act.

    2. Adumbrated in brief, the factual background as projected by the petitioners are as follows:

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    The petitioners, are Companies incorporated under the Companies Act as a Public Limited Company are carrying on the business of a race club, which includes lay-out and preparing any land for running of horse races, steeplechases of races of any other kind and for any kind of athletic sports. The petitioners particularly conduct horse racing and facilitates betting by the punters. The petitioners by themselves do not bet, but only facilitates punters in their betting activity.

    It is the punter who places the bet either with a totalisator run by the petitioners or a book-maker licensed by the petitioners.

    3. If a horse backed by the punter wins, the winning punter is required to surrender the receipt and receive the winning amount. It means, a losing punter’s money is used to pay the price money of the winning punter. The price money is distributed by the petitioners to the winning punter and out of the amount 6 Commission is set apart to be taken by the petitioners.

    This is the broad modus of functioning of the petitioners as claimed by it.

    4. Up to 30th June 2017 the petitioners claim to have discharged payment of service tax on the commission so retained and the betting tax under the provisions of the Mysore Betting Tax Act, 1932. On and from 1st July 2017, the Mysore Betting Tax and the Service Tax provisions stood repealed and the Goods and Services Tax laws were brought into force.

    5. From the appointed day i.e., 01-07-2017 a combination of these taxes; Central Goods and Services Tax (‘CGST’ for short), Integrated Goods and Services Tax (‘IGST’) and State Goods and Services Tax (‘SGST’ for short) and Goods and Services Tax of Union Territory (‘UTGST’) were all brought into force. Till the onset of these taxes, the petitioners were treated as service 7 providers under Chapter-V of the Finance Act, and Service Tax was levied on the petitioners’ commission alone. After the CGST regime began, an amendment was brought into Rule 31A by insertion of Rule 31A(3) to the CGST Rules. The amendment made GST payable by the petitioners on the amount of bet that gets into the totalisator. It is this amendment that is called in question by the petitioners in this writ petition on the ground that the Rule is made beyond the powers conferred under the CGST Act, which would render it to be ultra vires and has sought a consequential declaration that the CGST and KSGST be restricted…

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