Vijay Baburao Shirke GST Case – AAAR Maharashtra Rules on GST Applicability to Horse Racing Prize Money (2020)

Vijay Baburao Shirke GST Case: The scope of “supply” under GST (Section 7, CGST Act, 2017) is wide, covering goods and services provided for a consideration in the course or furtherance of business. However, disputes often arise when payments are received as prize money or stakes rather than against contractual services.

In the case In Re: M/s Vijay Baburao Shirke [2020 (10) TMI 48 – AAAR, Maharashtra], the question before the Appellate Authority was whether prize money received by horse owners for winning races amounts to a taxable supply under GST.

Background of the Vijay Baburao Shirke GST Case

Assessee: M/s Vijay Baburao Shirke, horse owner and race participant.

Activity:

• Owned specialized and trained racehorses.
• Entered horses in races conducted by the Royal Western India Turf Club (RWITC) and other clubs.
• Incurred expenses on training, stabling, and entry fees, paying GST and claiming Input Tax Credit (ITC).

Income:

• Received prize money only when horses won or placed in races.
• Did not transfer ownership of horses to race organizers.

AAR Maharashtra Ruling:

• Held that prize money = consideration for supply of services (i.e., providing horses for participation).
• Taxable at 18% GST (9% CGST + 9% SGST).

Appeal Filed:
The Revenue appealed before the AAAR Maharashtra, arguing that prize money does not qualify as consideration.

Legal Issue (Point of Dispute)

Whether the receipt of prize money from horse race organizers by winning horse owners constitutes a “supply” under Section 7 of the CGST Act and is therefore liable to GST.

Submissions by the Assessee

• Supported the AAR’s earlier decision.
• Argued that prize money is output consideration linked to horse participation in races.
• Claimed that GST already paid should be treated as correct, as the payment represents a service rendered to race organizers.
• Requested that the Revenue’s appeal be rejected.

Submissions by the Revenue

• No contractual service:
  Participation is voluntary, not under a contractual obligation. Race clubs merely provide opportunities in return for entry fees, which are already taxed.
• Prize money not linked to supply:
  Only winners receive prize money — not all participants. Therefore, no guaranteed or direct consideration exists.
• Uncertain and contingent:
  Prize money depends on chance, skill, and race outcomes, making it contingent rather than a contractual payment.
• No quid pro quo:
  For a transaction to be taxable, there must be a direct link between service and consideration. Prize money is a reward for achievement, not a payment for service.

Findings of the AAAR (Maharashtra)

The Appellate Authority accepted the Revenue’s contention and overturned the AAR’s ruling.

1. Participation vs. Prize Winning are Separate Events:
   • Horse owners provide horses to participate in races (against entry fees paid to race clubs).
   • Winning a prize is an independent outcome, not a service rendered to organizers.
2. No Direct Nexus with Supply:
   • Not all participants receive prize money.
   • Rewards are based on results, not on providing services.
3. Prize Money Not “Consideration” (Section 2(31)):
   • It is not paid in return for supplying horses.
   • It is a reward or recognition, not a business transaction.

Held:

• Prize money or stakes received by horse owners do not constitute a “supply” under Section 7 of the CGST Act.
• Such receipts are outside the GST ambit and therefore not taxable.

Practical Impact on Businesses

• ✅ Relief for horse owners: Prize winnings are not subject to GST.
• ⚖️ Tax neutrality restored: Race clubs’ entry fees remain taxable, but winnings are exempt.
• 📊 Precedent for similar cases: Competitive events and awards based on outcomes (e.g., contests, sports, talent shows) may follow similar logic.
• 🧾 Compliance clarity: Avoids double taxation where owners already pay GST on expenses and entry fees.

Key Takeaways

1. Prize money ≠ consideration: Rewards for winning are not payments for services.
2. Participation fees taxable, not winnings: Only entry fees charged by race clubs fall under GST.
3. No quid pro quo: Absence of direct service–payment link keeps prize money outside GST scope.
4. Landmark for sports & gaming: Clarifies GST applicability on winnings from competitive or skill-based activities.

Why This Case Matters

The Vijay Baburao Shirke GST case (AAAR Maharashtra, 2020) resolves a long-standing ambiguity about GST applicability on prize money in horse racing.

It reinforces the principle that GST applies only to supplies for consideration, not to contingent or outcome-based rewards. For the horse racing industry, sports events, and competitive businesses, this ruling provides much-needed clarity and relief — ensuring that GST remains a transaction-based tax, not an outcome-based levy.