Actionable claim exclusion from GST applies to contingent profit-sharing rights enforceable on a specified sale event.

A contingent contractual right to receive money from shareholders on a strategic sale or IPO, triggered only if the stipulated threshold is met, was treated as a beneficial interest in movable property enforceable on the specified event and therefore an actionable claim under the CGST Act read with the Transfer of Property Act. Because actionable claims other than lottery, betting and gambling are neither supply of goods nor supply of services under Schedule III, the profit-sharing arrangement fell outside the GST levy. The ruling also noted that the payment obligation rested on the shareholders, not the employer company, so the arrangement was not a service by an employee to an employer in the course of employment.

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Issues: Whether the profit sharing agreement entered into between the applicant and the shareholders of the company is an actionable claim and therefore outside the scope of GST under Schedule III of the Central Goods and Services Tax Act, 2017.

Analysis: The arrangement created a contingent right in favour of the applicant to receive a monetary benefit on the occurrence of a strategic sale or IPO at the stipulated threshold price. The obligation to pay was on the shareholders and not on the employer company, so the arrangement was not a service by an employee to the employer in the course of employment. The right claimed by the applicant was a beneficial interest in movable property not in his possession and was enforceable upon the occurrence of the specified event, answering the description of an actionable claim under Section 2(1) of the Central Goods and Services Tax Act, 2017 read with Section 3 of the Transfer of Property Act, 1882. Actionable claims other than lottery, betting and gambling are treated neither as supply of goods nor as supply of services under Schedule III.

Conclusion: The profit sharing agreement is an actionable claim and is not liable to GST.

Final Conclusion: The ruling holds that the contractual profit entitlement falls within the statutory exclusion for actionable claims and is therefore outside the GST levy.

Ratio Decidendi: A contingent contractual right to receive money from shareholders on the occurrence of a specified sale event, where the claim is for a beneficial interest in movable property and not within lottery, betting or gambling, is an actionable claim excluded from GST by Schedule III.

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