Uniform GST Rate for Lotteries at 28 % from 1st March – In-Depth Analysis

Deepti Shikha

25 May, 2023

Lotteries will now attract a uniform Goods and Services Tax (GST) from 1st March at 28 percent as notified by the Central Board of Indirect Taxes and Customs (CBIC). Currently, a state-authorized lottery draws a 28 percent tax, whereas the GST rate of a state-run lottery is at 12 percent. The GST Council^[1] led by Finance Minister Nirmala Sitharaman in December last year resorted to voting in order to decide the issue of the GST rate for lotteries. In the 38th GST Council meeting, the GST Council decided to impose a single rate of 28 percent for both the state-run and state-authorized lotteries. The revenue department notified about the new rate of GST for lotteries, on the supply of lotteries and amended its earlier Central Tax (Rate) notification. According to this amendment, there is no difference between the lottery authorized by state Governments and the lottery run by the State Governments for taxability, and the standard rate of 28% shall apply. Now, a uniform GST for lotteries has been implemented.

The lottery industry demanded a uniform tax rate on lotteries, following which a group of ministers was set up to suggest the implementation of a uniform GST for lotteries.

The eight-member group of ministers headed by the then Maharashtra Finance Minister Sudhir Mungantiwar had recommended that the Council would decide either on 18 percent or 28 percent GST for lotteries.

Meaning of Lottery Run by State Governments and Lottery Authorised by State Governments

Lottery Run by State Government

Lottery Authorised by State Governments

After this notification, there is no difference between ‘Lottery run by State Governments’ and ‘Lottery authorised by State Governments’. The uniform GST for lotteries is notified by the Government at 28%.

Value of Lottery Distribution in GST

The value of lottery distribution as per Section 15 of the Central Goods and Services Tax(CGST) Act, 2017 shall be considered as 100/128 of the ticket’s face value or price as notified by the organising State in the Official Gazette, whichever is higher.

The supply of lottery tickets is covered by the Tax Invoice in accordance with Section 31 of the Central Goods and Services Tax (CGST) Act of 2017 and includes all the provisions referred to in Rule 46. The invoicing standards for a lottery ticket manufacturer are not relaxed in this provision. The GST for lotteries must be under the cover of a tax invoice containing all particulars required in an invoice.

GST Registration

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• Get in Direct call with a CA.
• No Need to Visit Government office
• Get Free Advisory for GST Rates.
• Free GST Software for 30 Days

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Payment of GST -Sub-Agents of Lottery Tickets

• If tax is paid by the distributor, then the sub-agent or customer is not enforced to pay tax.
• The sub-agents are not required to register under GST.
• In the case of ‘Lottery authorized by State Government.’
• The tax must be paid under the forward charge by the supplier of lottery tickets.
• The tax must be paid at each point of supply under regular charge. When selling agent sells tickets to sub-agent, he must pay GST.
• The Sub-agents must register under GST and pay tax accordingly.

Amendments Made in Notification No. 1/2020-Central Tax (Rate)

The following amendments are made in the Notification No. 1/2020-Central Tax (Rate):

• In the Schedule II of the Notification Number 1/2017-Central Tax (Rate): 6% for Serial Number 242 was omitted through this notification.

• In the Schedule IV of Notification Number 1/2017- 14% for S. No. 228 and the related entries, and the following was substituted namely:

Hence, through this amendment, S. No. 242 in Schedule II was omitted, and in Schedule IV, the Government introduced the Goods and Service Rates (GST) rates of the lottery.

Further, a notification also consisted of a note which applied to the Principle Notification No. 1/2017-Central Tax (Rate) that was published on the Gazette of India on 28th June 2017, Extra-ordinary, Part II, Section 3(i) vide number G.S.R. 673(E), dated 28th June 2017 and last amendment by Notification No. 27/2019-Central Tax (Rate) dated 31st December 2019, published in the Gazette of India, Extraordinary, Part II, Section 3(i) vide number G.S.R. 961(E) dated 30th December 2019.
Takeaway

Gambling in the form of lottery is permitted in a few states, where it has penetrated at grass root levels. By changing the GST for lotteries from a prospective date will help the dealers in implementing the new tax rate effectively. A uniform rate on lottery brings uniformity between the state-run and authorised lotteries fixing an equal footing for businesses in the same line.