In the case of In re Vijay Baburao Shirke, the applicant owned horses and would often participate in horse races organised by the Royal Western India Turf Club (RWITC). Once the race is completed the winner gets the prize money. The applicant also won several competitions and paid GST on the prize money received from July 2017. However, on knowing that other competitors were not paying GST, the applicant approached the AAR Maharashtra to get clarity. The AAR Maharashtra ruled that prize money was covered u/s 7 of CGST Act, 2017 and hence 18% GST (9% CGST+9% SGST) would be applicable.
Aggrieved by the said order, the applicant approached the AAAR Maharashtra.
The Appellate Authority explained that in order to be covered under ‘supply’ u/s 7(1)(a) of the CGST Act, 2017-
i. There should be a supply of goods or services or both.
ii. It should be for a consideration.
iii. It should be in the course of furtherance of business.
Hence there should be supply of goods/services and there should be a consideration received for the same in the course of business.
It was held that in case of horse races, only the winners get consideration (prize money) for bringing their horses for races and not all the participants. There must be direct and immediate nexus between the supply and consideration, which was absent in the above case as participation and winning are two separate events/transactions. There is element of supply when horses get to participate, however it is absent when the horses win the race. Moreover, the winners have not provided any service to the club by letting their horses participate and therefore the prize money cannot be seen as a consideration against supply. Hence, no GST shall be applicable on the prize money the winners get.
Similarly in the case of Skill Lotto Solutions P. Ltd. v. Union of India, the Hon’ble Supreme Court held that GST shall be levied in case of actionable claims limiting them to only three aspects- lottery, betting and gambling. All the other claims would be outside the ambit of GST.
Drawing conclusions from the above court pronouncements, it can be clearly deduced that in case of ‘Prize Money’, there will be no GST applicable if there is no element of ‘supply’ u/s 7 of CGST Act, 2017. There is no direct and immediate nexus between the supply and consideration in this case. Hence, no GST shall be applicable on the winning award money.
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