The winner of a horse race or any game of chance will not penalised by way of extra taxes as GST levy with the Appellate Authority of Advance Ruling, Maharashtra ruling that winner of a game is not rendering any service or making any supply and the prize money is outcome of an event where results are not universal.
In general parlance, the order means that prize money from winning a derby or any other game where outcome is not known, will not be subject to Goods and Service Tax (GST). This is expected to give a big boost to the operation of such games.
The AAAR said that in a horse race, there are two separate transactions: participation in races organised by horse racing clubs against entry fee payable by the horse race owner, which is supply of service by the race conducting entity to such aspiring horse race owners and thereby, attracts GST.
But the second element, where a race participant is supplying horses for the event, delineates in detail how there is no element of service when the respondent's horse wins the race and gets the prize.
Thus, there is no direct nexus between the activities carried out by the horse owners viz. by providing thoroughbred horses to race clubs for organising horse race events, and the prize money received by such horse owners.
The clause of direct and immediate link between the supply and consideration is absolutely absent in the present situation and participation and winning are two separate events/transactions, the AAAR said.
Earlier, the AAR (Authority for Advance Rulings) had ruled that the amount of prize money received from the events conducting entities would be covered under supply category of the GST law and would be liable to be taxed at 18 per cent.
The implication of the AAAR order is that in all games of chance, including various online games that are getting popular now, the winning amount would not attract GST.
"This order by Maharashtra AAAR is a fair and equitable order for all the horse owners. AAAR held that prize money received by horse owners is not exigible under GST laws as there is no direct nexus between the activities carried out by the horse owners i.e. by providing horses to race clubs for organising horse race events, and the prize money received by such horse owners," said Rajat Mohan Senior Partner, AMRG & Associates.
"It would give relief not only to winners of horse races but also any winner of a game of chance, whereby such a person is not providing any supply for the said financial benefit," he added.
While the AAAR has given relief to the winner of a derby, it said that since there is no taxable supply (by the participant), the assessee will not be eligible to avail ITC (input tax credit) 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.
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