Appellate Authority confirms 28% GST for mall gaming zone as "amusement facility"

The Appellate Authority upheld the ruling of the Authority for Advance Ruling, determining that the Company's gaming zone in a mall qualifies as an "amusement facility" rather than an "amusement park." As a result, the services provided by the Company are subject to GST at the rate of 28% (CGST @14% + SGST @14%) under specific notifications, not the reduced rate of 18% applicable to amusement parks.

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Issues Involved:
1. Determination of GST rate on services provided by the Company.
2. Classification of the Company’s services as either an "amusement park" or "amusement facility."
3. Interpretation of relevant statutory provisions and notifications.

Issue-Wise Detailed Analysis:

1. Determination of GST rate on services provided by the Company:
The Company, engaged in providing amusement facility services and running a family entertainment center, sought an Advance Ruling to determine the applicable GST rate on its services following the issuance of GST Notification 01/2018. Initially, the applicable GST rate was 28%, which was later reduced to 18% for amusement parks through Notification 01/2018. The Company contended that its services fell under the category of "amusement park" and thus qualified for the reduced GST rate of 18%.

2. Classification of the Company’s services as either an "amusement park" or "amusement facility":
The Company argued that its services should be classified as an "amusement park" based on the definition provided in the erstwhile Bombay Entertainment Duty Act, which includes various types of amusements such as games or rides provided on a permanent basis. The Company highlighted that its services promote social wellness, fun, and learning for children, aligning with the objectives mentioned in the press release following the 25th GST Council meeting.

The Authority for Advance Ruling (AAR) and the Appellate Authority examined definitions from various sources, including the Bombay Entertainment Duty Act, dictionaries, and Wikipedia. The AAR distinguished between "amusement parks" and "amusement facilities," noting that amusement parks typically cover large open areas with multiple attractions, while amusement facilities are confined to smaller, enclosed spaces offering singular attractions like gaming machines.

3. Interpretation of relevant statutory provisions and notifications:
The AAR relied on the definition of "amusement facility" from the erstwhile Finance Act, 1994, which includes fun or recreation provided by rides, gaming devices, or bowling alleys in amusement parks, amusement arcades, water parks, theme parks, or similar places. The AAR concluded that the Company's gaming zone, situated in a mall, fits the description of an "amusement arcade" rather than an "amusement park."

The AAR also referred to the Supreme Court judgment in Commissioner of Customs (Import), Mumbai v/s Dilip Kumar and Company & ORS, emphasizing that exemption notifications should be interpreted strictly, and the burden of proving applicability lies with the assessee. The AAR determined that the Company's services did not meet the criteria for an amusement park due to the enclosed nature of the premises and the lack of auxiliary facilities typically associated with amusement parks.

Final Judgment:
The Appellate Authority upheld the AAR's ruling, affirming that the gaming zone operated by the Company in the mall premises would attract GST at the rate of 28% (CGST @14% + SGST @14%) under entry (iiia) of Sr.34 of Notification No. 11/2017-C.T. (Rate) dated 28.06.2017, as amended by Notification No. 1/2018-C.T. (Rate) dated 25.01.2018. The Authority concluded that the Company's services are classified as an "amusement facility" rather than an "amusement park," thus not qualifying for the reduced GST rate of 18%.

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