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GST on Supply of Lottery
Goods and Services Tax (GST) is levied on supply of Goods or Services. Does Lottery come in the purview of GST? Does it fulfill definition of Goods and Services as defined by GST? Does it fulfill definition of Supply under GST?
When we define Goods in GST it says Goods includes every kind of movable property, actionable claims, Growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply.
Lottery is an actionable claim and as per above definition Actionable claims are included in definition of Goods. Now, what about supply? Going deeper in the law Schedule III read with Section 7 of the CGST/SGST Act lists the activities or transactions which shall be treated neither as supply of goods nor supply of services. Para 6 of this Schedule specifies actionable claims other than lottery, betting and gambling as one of such transactions that shall not be treated as supply.
It means lottery is an actionable claim that is supply and is chargeable to GST. There are two kinds of Lotteries:
- Lottery run by State Government
- Lottery authorised by state Government.
Lottery run by State Government
The lotteries that are run by State Government are chargeable at the rate of 12%. Since the supplier of such Goods is Government these supply are also notified as Reverse Charge Supplies.
When the Government supplies the lotteries to the Lottery Distributor or Selling Agent the agent needs to make the GST payment of that supply to Government under Reverse Charge Mechanism (RCM).
When the Selling Agent or Distributor supplies the tickets to the local agents such supply shall be treated as exempt if the distributor has paid GST on the transaction when supplied by the Government.
In this case GST Registration needs to be taken by the Lottery Distributor or Selling Agent. The Local Agents need not take the GST Registration.
Lottery authorised by State Government
In case of the lotteries that are authorised by State Government the GST rate chargeable is 28%. The basic difference here is not only the rate but also the mechanism of payment of tax. Tax here is paid under Normal Charge when the lottery tickets are distributed by Lottery Distributor to Local Agent. When further the local agents distributes the tickets (make supply) GST needs to be paid by them under Normal Charge, no exemption is given in this case. All the Distributors and Local Agents are liable to take GST registration (the threshold limit applies) and make the GST payment if the Lottery is authorised by Government.
Valuation of Supply of Lottery
In case of supply of Lottery, for the valuation of taxable supply the higher of the following amount shall be considered as equivalent to be inclusive of GST:
- Face Value of the tickets
- Price notified by Organizing State
The higher of the two amounts above shall be multiplied by 100 and divided by 100 plus tax rate* for determination of taxable supply.
* The tax rate shall be as mentioned above in the individual cases of lottery authorised by and run by State Government.
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