GST on Lottery In India: Everyone wants to win a lottery and live life happily ever after. But after the introduction of Goods and Services Tax in July 2017 Lottery Business itself ran into a crisis. The levy of GST was on the face value of lottery tickets, including the prize money awarded to winners. And, this has crippled the lottery industry by the rampant increase in illegal lottery. Additionally, it has also affected the tax collection of the Government. Taxation of Lottery was done under two tax brackets 12% and 28%.
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Goods And Services Tax on Lottery In India
Goods and Services Tax (GST) is a destination-based tax. It is one indirect tax for the whole nation, which will make India one unified common market. It is based on the principle of One Nation One Tax. GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Must Check Going Concern Concept.
Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages
The single GST subsumed several taxes and levies, which included central excise duty, services tax, additional customs duty, surcharges, state-level value-added tax, and Octroi. Other levies that were applicable to inter-state transportation of goods have also been done away with in the GST regime.
GST on Lottery In India
GST on lottery sales has caught the attention of the GST Council since the 31st GST Council Meeting held on 22nd December 2018. Tax revenue from the sale of lottery tickets has been a major source of Exchequer for the Government. At present, lotteries run by state governments attract 12% GST while those authorized by them and sold outside the state are taxed at 28%. Must Check What is Net Salary?
The Lotteries (Regulation) Act, 1998 defines Lottery under Section 2(b)
(b) “lottery” means a scheme, in whatever form and by whatever name called, for distribution of prizes by lot or chance to those persons participating in the chances of a prize by purchasing tickets;
A lottery is a form of gambling that involves the drawing of numbers at random for a prize. Lotteries are outlawed by some governments, while others endorse them to the extent of organizing a national or state lottery. It is common to find some degree of regulation of lottery by governments; the most common regulation is the prohibition of sale to minors, and vendors must be licensed to sell lottery tickets. The CBIC has clarified that the HSN classification of the lottery shall be “Any Chapter” and tax would be paid at applicable rates (12% or 28%).
‘Lottery tickets’, is the actionable claim and is classified as ‘Goods’, under GST. However, an actionable claim is specifically covered under the negative list-schedule III of the CGST Act, 2017 keeping it outside the scope of GST. But there are exceptions to schedule III. The sale of Lottery tickets is one of them
Hence, the sale of lottery tickets would be considered to be the supply of taxable goods and will attract GST on Lottery sales.
In the case of a supply of lottery tickets, the value for charging GST shall be higher than the following:
- 1. The Face value of the ticket
- 2. Price notified by the organizing state
PAYMENT OF TAX UNDER REVERSE CHARGE
In the case of a lottery run by the State Government, the tickets are sold by the State Government to the lottery distributor /selling agent. The selling agent is required to pay tax under reverse charge.
Subsequently, when the selling agent supplies such tickets to a sub-agent, no tax is required to be paid. The local sub-agent is also not required to pay any tax. Thus, a tax is levied at a single – point under reverse charge in case of a lottery run by the State Government.
However, in the case of a lottery authorized by the State Government, the tax is to be paid under the forward charge by the lottery selling agent (i.e.supplier). A tax must also be paid at each stage of supply.
| Lottery run by State Government |
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| Lottery authorised by State Government |
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INVOICING REQUIREMENTS
Supply of lottery tickets must be under the cover of a tax invoice containing all particulars required in an invoice. The invoice is required to be issued with the sale of a lottery ticket. There is no relaxation in invoicing requirements for a supplier of lottery tickets.
TIME OF SUPPLY
The time of supply of lottery tickets shall be earlier than the following dates:
- 1. Date of issue of invoice or last date when the supplier is required to issue an invoice.
- 2. Date on which supplier receives the payment for supply.
When a person pays the amount to participate in a lottery or to buy a lottery ticket, the amount of money paid to participate is treated as payment for supply. Must Read How to Finalize Balance Sheet.
DETERMINATION OF PLACE OF SUPPLY
Lottery run by the State Government is always an intra-state supply. The place of supply will always be the State that runs the lottery game. This is because such a lottery scheme is always conducted within the State.
Lottery authorized by the State Government but conducted by agencies can be an interstate or intra-state supply. The place of supply will have to be determined as under:
- When supply involves the movement of goods: The place of supply shall be the location of goods at the time at which the movement of goods terminates for delivery to the recipient.
- When supply does not involve the movement of goods: The place of supply shall be the location of goods at the time of delivery to the recipient.
Conclusion
All decisions in the previous 37 meetings of the GST Council, headed by the union finance minister with state ministers as its members, had been taken unanimously. But the Goods and Services Tax (GST) Council 38th meeting held on 18th December 2019 departed from its practice of consensus-based decision-making, opting for the first time for a vote to settle differences among states over the taxation of lotteries.
The Goods and Services Tax (GST) Council led by our honourable Finance Minister has voted to increase the rate as well as implement a single rate for lotteries. Buyers would now have to shell out 28 percent GST on lotteries.
Before the GST Council meeting on Friday, the lottery industry pitched for a single rate of 12 percent and removal of tax on the prize money. Currently, only lotteries run by the state and state-owned agencies levy 12 percent GST. Industry players that are authorized by the state government who sell outside the organizing state and are conducted by private players attract a 28 percent tax
Since there were wide differences among finance ministers of various states, the issue of tax on lotteries was prompted by a panel of ministers that was set up in January 2019. The eight-member group of ministers was constituted under the chairmanship of the Maharashtra Finance Minister. The panel had recommended that the council would decide either on 18 percent or 28 percent GST for lotteries.
All lotteries are organized by states as per the provisions of the Lottery Regulation Act 1998. Currently, ten states in the country including Maharashtra, West Bengal, Punjab, and Arunachal Pradesh allow lotteries.
After the meeting single rate of GST @ 28% on both State-run and state-authorized lottery was fixed which would be effective from 1st March 2020.
