Central government files appeal against Karnataka HC horse-racing GST order

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The Union of India has filed a Writ Appeal before a Division Bench of the Karnataka High Court against the single judge bench’s order dated 2nd June, 2021 striking down Rule 31A(3) of the Central Goods and Services Tax Rules, 2017 and the Karnataka Goods and Services Tax Rules.

The intra-court appeal has been filed by the central government on 15th July 2021 and is not yet registered or listed before an appropriate division bench. It is likely that the matter will be listed in the coming weeks and the central government may press for interim relief of staying the operation of the order passed by the single judge

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It may be remembered that Justice M. Nagaprassana of the Karnataka High Court in a detailed and landmark judgment last month ruled that the Bangalore and Mysore Turf Clubs hold bets made by punters in a totalisator in trust and earn only commission out of the pooled money, while distributing bulk of the monies collected as prize.

It further observed that club is not engaged in the activity of gambling or betting themselves but is merely facilitating betting among punters and consequently struck down Rule 31A(3) of the CGST Rules, which imposed 28% GST on the face value of the bets placed in a totalisator in a race club, rather than on commission. The decision was hailed by the gaming industry and was likely to support the claims of online skill-based gaming industry in future litigation.

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However, with the appeal preferred by the central government and a Group of Ministers (GoM) formed by the GST Council to propose any changes in the valuation of services or taxability of transactions in online gaming, horse racing or casinos, the tax regime for online skill-based games and horse racing remains far from certain.