Rule 31A(3) of the CGST Rules is contrary to the CGST Act and the petitioners are liable for payment of GST on the commission that they receive for the service that they render through the totalisator and not on the total amount collected in the totalisator.
Rule 31A(3) of the CGST Rules, 2017— GST on the entire bet amount - The petitioners challenged the legislative intent of making the petitioners liable to pay GST on the entire bet amount received by the totalisator and declare the amendments dated 25-01-2018 which inserted Rule 31A(3) to the CGST Rules as being ultra vires the CGST Act. The petitioners are carrying on the business of a race club and facilitates betting by the punters. Up to 30th June 2017 the petitioners claim to have discharged payment of service tax on the commission so retained and the betting tax under the provisions of the Mysore Betting Tax Act, 1932. After GST regime, an amendment was brought into Rule 31A by insertion of Rule 31A(3) to the CGST Rules. The amendment made GST payable by the petitioners on the amount of bet that gets into the totalisator. The respondent counsel submitted that the Act itself has mandated levying of tax on an actionable claim; What is actionable claim is not defined under the Act, it is in the Rules; Betting is also an actionable claim in terms of the Rules. The court observed that the definitions and other provisions of the Act do not bring in the activity of the petitioners under the ambit of the Act. Rule 31A(3) travels beyond what is conferred upon the Rule making authority under Section 9 which is the charging section, by way of an amendment to the Rule. Therefore, Rule 31A(3) which does not conform to the provisions of the Act will have to be held ultra vires the enabling Act.
Held that:- The Hon’ble High Court set aside Rule 31A(3) of the Rules, 2017 in terms of notification dated 23.01.2018 as ultra vires the provisions of the Act. Sequentially, the clarification/Circular No.27/01/2018-GST dated 4.1.2018 is also quashed insofar as it concerns the petitioners. The petitioners shall be entitled to all consequential benefits that flow from the aforesaid orders.