Karnataka High Court’s division bench stays verdict on levy of GST on horse racing clubs

A Division Bench of the High Court of Karnataka, comprising Justice Satish Chandra Sharma and Justice Sachin Shankar Magadum, on Thursday stayed the operation of a single-judge bench’s order that had ruled that it is incumbent upon race clubs to pay GST only on the commission and not on the bet’s entire face value or the amount paid into the totalizer.

The interim order was passed after hearing the appeals filed by the state and central governments, reported The Hindu. Further hearing has been adjourned to 7 October.

The veracity of the single bench’s judgment, which had struck down Rule 31A(3) of the Central GST Rules, 2017 and the corresponding Rule 31A of the Karnataka GST Rules, 2017 as being contrary to the GST Act, had been questioned by both governments.

The petitions filed by the Bangalore Turfs Club Ltd and Mysore Race Club Ltd against the levy of GST on the face value of the bet were allowed by the single bench.

The Division Bench, last week, had ordered to keep in abeyance the application filed by the BTC wanting a refund of the GST paid referring to the judgment of the single bench.

On Thursday, as the appeals came up for hearing, the Division Bench, after hearing arguments of BTC and the governments, stayed the single bench’s judgment and noted that appeals require consideration.

The appeals argued that the single bench should have factored in the pre-GST regime wherein the race clubs were subject to a totalizator tax and betting tax on the full bet amount.

The governments, in their appeals, have argued that the single bench has not applied correctly the ratio laid by the Supreme Court in the case of Skill Lotto Solutions vs Union of India, 2020 on the provisions to levy GST on lottery, betting, and gambling.