2020 (10) TMI 48 - AAAR - GST

Maintainability of application - Whether the impugned advance ruling, being allegedly obtained by the Respondent by suppressing the material facts regarding the investigation initiated against him by the DGGI, PZU on the same issues as those raised in the subject advance ruling application, is sustainable in terms of proviso to section 98(2) read with section 104 of the CGST Act, 2017, or not? - HELD THAT - the investigation proceedings were initiated under the Service Tax and not under the CGST Act. Therefore, Section 98(2) is not attracted as there was no proceeding pending under the provisions of the CGST Act. Levy of GST - prize money received from the horse racing clubs for winning the horse race competition - Taxable supply or not - HELD THAT - By applying the definition of Supply to the facts and circumstances of the case at hand, it is observed that no service has been provided by the Applicant- Respondent to the racing clubs for the Prize money/ stakes received from such clubs, as it is not in dispute that not all horse owners, who agree to provide their horses to such race organising clubs, get this consideration in the form of the said prize money/ stake from such clubs. Only those horse owners receive these considerations whose horses win the races organized by such clubs. 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 Applicant-Respondent has himself contended in their submissions as reproduced herein above that for the occurrence of any taxable event, there must be direct and immediate link between the supply made and the consideration received. He has also cited few judicial pronouncements to strengthen his arguments. However, as discussed, in the present facts and circumstances, this clause of direct and immediate link between the supply and consideration is absolutely absent in the present situation. As such, it would not be construed as taxable supply /events. The applicant- respondent had contended that they provide service to the Club and that the contract is a conditional contract and therefore there is supply. The applicant-respondent has argued there may be a conditional contract here and we might assume that for the moment. But not every contract becomes taxable under the CGST law. Every supply is a contract but not every contract is a supply. In order to levy tax under the CGST Act there should be supply of goods/ service and there should be consideration - We have already delineated in detail as to how there is no service provided in the present case and therefore the argument of the appellant is not acceptable. Whether they would be eligible to avail ITC in respect of the expenses incurred on the entry fee paid to the horse racing clubs, training charges paid to the trainers, amount paid to the jockeys, etc.? - HELD THAT - Since there is no taxable supply by the Applicant Respondent in the present arrangement, there is no question of availment of ICT as per the provisions of section 17 (2) of the CGST Act, 2017 - thus, it is abundantly clear that input tax credit is restricted to the portion of taxable supplies only. Therefore, 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 paid to the jockeys, etc. The prize money/ stakes will not be subject to GST in the absence of any supply - the Applicant- Respondent is also not entitled to avail any ITC in accordance with the provisions of section 17 (2) of the CGST Act, 2017 - The AAR decision set aside.

Summary

Issues Involved:
1. Whether the prize money/stakes received by the Applicant-Respondent from horse racing clubs for winning races is subject to GST.
2. Whether the Applicant-Respondent is eligible to avail Input Tax Credit (ITC) on expenses incurred on entry fees, training charges, and other related expenses.
3. Whether the advance ruling obtained by the Applicant-Respondent is void ab-initio due to suppression of material facts regarding an ongoing investigation by DGGI.

Detailed Analysis:

1. GST on Prize Money/Stakes:
The core issue examined was whether the prize money received by the Applicant-Respondent for winning horse races constitutes a "supply" under Section 7 of the CGST Act, 2017, and is thus subject to GST.

- Definition of Supply: According to Section 7(1)(a) of the CGST Act, "supply" includes all forms of supply of goods or services made for a consideration in the course or furtherance of business.
- Consideration and Direct Nexus: The ruling emphasized that there must be a direct and immediate link between the supply made and the consideration received. In this case, the prize money is only awarded to the winning horses, not to all participants, indicating no direct nexus between the participation and the prize money.
- Service to Race Clubs: The ruling found no service provided by the horse owners to the race clubs for the prize money received. The participation of horses in races and winning are separate events. The entry fee paid by horse owners to participate is a service provided by the race clubs, not the other way around.
- Conclusion: The ruling held that the prize money/stakes received by the horse owners do not constitute a "supply" under Section 7 of the CGST Act, 2017, and thus are not subject to GST.

2. Eligibility for Input Tax Credit (ITC):
The second issue was whether the Applicant-Respondent could avail ITC on expenses related to entry fees, training charges, and other related expenses.

- Section 17(2) of the CGST Act: This section restricts ITC to the extent of taxable supplies. Since the prize money/stakes are not considered a taxable supply, the ITC on related expenses is not permissible.
- Conclusion: The Applicant-Respondent is not eligible to avail ITC on expenses incurred for entry fees, training charges, and other related expenses.

3. Validity of Advance Ruling:
The third issue was whether the advance ruling obtained by the Applicant-Respondent was void ab-initio due to suppression of material facts about an ongoing investigation by DGGI.

- Section 104 of the CGST Act: This section permits the authority to declare an advance ruling void ab-initio if obtained by fraud or suppression of material facts.
- Investigation by DGGI: The investigation was initiated under the Service Tax regime, not under the CGST Act. Therefore, Section 98(2) is not applicable as there was no pending proceeding under the CGST Act at the time of filing the advance ruling application.
- Conclusion: The advance ruling was not obtained by suppression of material facts as the investigation was under a different regime, and thus the advance ruling stands valid.

Order:
The advance ruling issued by the Authority for Advance Ruling (AAR) was set aside. It was held that the prize money/stakes received by the Applicant-Respondent are not subject to GST due to the absence of any supply. Consequently, the Applicant-Respondent is not entitled to avail any ITC in accordance with Section 17(2) of the CGST Act, 2017.