Taxation of Distribution of Lottery Tickets under GST

GST on lottery sales has caught the attention of GST Council since the 31st GST Council Meeting. Tax revenue from the sale of lottery tickets has been a major source of Exchequer for the Government. Hence, it becomes pertinent to analyse the GST implication on the sale of lottery tickets.

Applicability of GST on Lotteries

‘Lottery tickets’, is 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, keeping it outside the scope of GST. But there are exceptions to schedule III. 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.

Rate of GST on the sale of Lottery Tickets

GST rate on the supply of lottery tickets are as follows-

Nature of lottery gaming	GST rate
Run by State Government – It is conducted within the State and conducted by state-owned agencies	12%*
Authorised by State Government – It can be sold outside the organising state and is conducted by private players	28%*

  *A Committee has been formed to study the differential levy of tax on the sale of Lottery Tickets on 16th Jan’19

How to calculate the Value of Supply

In case of supply of lottery tickets, the value for charging GST shall be higher of the following:

1. The Face value of ticket
2. Price notified by the organising state.

The value arrived above shall be inclusive of GST.

Illustration 1: Government of Arunachal Pradesh runs a lottery gaming competition. The face value is 105. The price notified by the State is INR 112. What will be the taxable value and GST amount?
Answer: Higher of face value (105) and price notified by the State (112) is INR 112.   INR 112 is inclusive of GST. The GST rate on state-run lottery programme is 12%. Thus, Price before GST = (112 * 100) / (100 + GST rate) = (112*100) / (112) = INR 100 Thus, taxable value = INR 100 GST amount = INR 12.  

Illustration 2: Similarly, if the lottery would have been organised by a private player, the GST rate would be 28%. The Price before GST = (112 * 100)/ (100 + GST rate) = (112*100) / (128) = INR 87.5. Thus, taxable value = INR 87.5 GST amount = INR 24.5

HSN Classification of Lottery Tickets

The CBIC has clarified that HSN classification of the lottery shall be “Any Chapter” and tax would be paid at applicable rates (12% or 28%).

Payment of tax under Reverse Charge

In the case of lottery run by State Government, the tickets are sold by the State Government to lottery distributor /selling agent. The selling agent is required to pay tax under reverse charge.

Subsequently, when the selling agent supplies such tickets to 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 single – point under reverse charge in case of lottery run by State Government. However, in the case of lottery authorised by 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	1. Tickets sold by State Government 2. Lottery distributor must pay tax on reverse charge at the time of procurement of tickets from the Government. 3. No tax required to be paid further when sold to sub-agent / customer, if a tax is paid by a distributor. 4. Sub-agents not required to register under GST
Lottery authorised by State Government	1. Tax paid under the charge by the supplier of lottery tickets 2. The tax must be paid at each point of supply under normal charge. When selling agent sells tickets to sub-agent, he must pay GST. 3. Sub-agents must register under GST and pay tax.

Invoicing requirements

Supply of lottery tickets must be under the cover of 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 to know GST on Lottery

The time of supply of lottery tickets shall be earlier of 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 the lottery ticket, the amount of money paid to participate is treated as payment for supply.

Place of supply to know GST on Lottery

• Lottery run by State Government is always an intra-state supply. The place of supply will always be the State which runs the lottery game. This is because such a lottery scheme is always conducted within the State.
• Lottery authorised by the State Government but conducted by agencies can be an inter-state 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 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.