GST on totalisator services is confined to commission, as taxable value cannot extend to betting funds held for distribution.

Rule 31A(3) of the CGST Rules was found inconsistent with the CGST Act because a subordinate rule cannot enlarge the charging provision by treating all amounts passing through a totalisator as taxable value when GST must relate to the actual supply and its consideration. The text states that totalisator operators render a service for commission, while betting monies are held temporarily for distribution to winners and do not form consideration for the service supplied. GST liability is therefore confined to the commission earned for totalisator services, not the entire amount collected.

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Issues: (i) Whether Rule 31A(3) of the Central Goods and Services Tax Rules, 2017 is ultra vires the Central Goods and Services Tax Act, 2017. (ii) Whether the petitioners are liable to pay GST on the commission received or on the entire amount collected in the totalisator.

Issue (i): Whether Rule 31A(3) of the Central Goods and Services Tax Rules, 2017 is ultra vires the Central Goods and Services Tax Act, 2017.

Analysis: GST under the Act is levied on supply, the value determined under the Act, and payment by the taxable person. The concept of supply under Section 7, read with the charging provision, requires a nexus between the taxable event and the measure of tax. The petitioners' activity through a totalisator was treated as a service for which commission is earned, while the monies collected for betting were held only temporarily and in a fiduciary capacity for distribution to winners. Rule 31A(3), by treating the whole amount paid into the totalisator as the value of supply, enlarged the levy beyond the scope of the parent Act and disconnected the measure from the actual taxable supply rendered by the petitioners.

Conclusion: Rule 31A(3) is ultra vires the Act and cannot stand against the petitioners.

Issue (ii): Whether the petitioners are liable to pay GST on the commission received or on the entire amount collected in the totalisator.

Analysis: The petitioners did not supply the betting amount itself; they provided totalisator services and retained only commission for that service. The balance amount collected from punters was merely held for redistribution and did not constitute consideration for a taxable supply by the petitioners. The taxable value, therefore, must correspond to the service actually supplied and not to the aggregate sums passing through the totalisator.

Conclusion: The petitioners are liable to pay GST only on the commission received and not on the entire amount collected in the totalisator.

Final Conclusion: The impugned rule and consequential circular were struck down insofar as they applied to the petitioners, and GST liability was confined to the commission earned for totalisator services.

Ratio Decidendi: A subordinate tax rule cannot expand the charging field of the parent Act by fixing the taxable value on amounts that are not consideration for the actual supply, and tax on totalisator operations must be confined to the commission earned for the service rendered.

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