Article explains Taxability of Lottery under Goods and Services Tax Act, 2017, Whether lottery is goods or services, Whether the lottery should be in physical form to be considered as goods, What are the conditions for making supply of lottery a taxable supply, What is the rate of tax of lottery, Is an invoice required to be issued in case of lottery and Whether lucky draw/ coupon/ lottery organised by commercial establishment during festive season be considered as lottery.
The word Lottery is used only once in the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the ‘Act’) in Schedule III which deals with activities and transaction which are neither supply of goods nor supply of services. However, lottery is an excluded actionable claim under Entry 6 of Schedule III of the Act. Section 2(52) of the Act defines goods which includes Actionable Claim.
Actionable claims has been accepted under the Act as per its definition given under Section 3 of the Transfer of Property Act, 1882. Actionable claim is a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledge of movable property, or to any beneficial interest in movable property not in possession either actual or constructive, of the claimant which the civil courts recognises as affording grounds of relief whether such debt or beneficial interest be existent, accruing or conditional or contingent.
Consequently, since lotteries are generally speaking “goods” and come within the definition of “actionable claims”, and since, lotteries are kept out of the purview of “actionable claims” which do not attract the goods and services tax, lottery can therefore be charged to tax under the 2017 Act.
A reference can be made to Teesta Distributors and Others v. Union of India (2018) 59 GSTR 35Y (Cal).
In India, lottery is regulated by the Lotteries (Regulation) Act, 1998 and as per Section 2(3) of that Act, “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.”
Since, the lottery can be in any form, it is then not necessary that it should only be in physical form to be considered as goods.
To be a taxable supply under Goods and Services tax Act, all the following ingredients of Section 7 needs to be present:
a) The supply should involve goods or services or both
b) In form of sale, transfer, barter, exchange, license, rental, lease or disposal
c) Made for a consideration
d) By a person
e) In the course or furtherance of business
It is discussed above that lottery is goods specified under Section 2(52) of the Act.
Lottery is an actionable claim as defined under Transfer of Property Act, 1882 and hence is a supply of goods in form of transfer.
A consideration should be charged for the lottery.
Lottery should be transferred by a Person which includes
f) Association of Person or Body of Individual,
g) Corporate establishment by or under any Central or State Provincial Act,
h) Body Corporate,
i) Co-Operative Society,
j) Local Authority, Central or State Government,
k) Society under Society Registration Act, 1860,
m) Every Artificial Juridical Person, not falling in any of the above category
Lottery should be conducted in the course or furtherance of business.
Initially there was a discrepancy amongst suppliers that though lottery are taxable as goods but code allotted for lottery is that of service. The matter was then clarified vide Circular No. 6/6/2017 Dt. 27.8.2017 that the classification for lottery in respective CGST/ SGST/ IGST/ UTGST notifications shall be “Any Chapter” of the 1st Schedule to the Customs Tariff Act, 1975 and tax on lottery shall be 12% or 28%, as the case may be.
Lottery run by a State Government 12%
Lottery Authorised by State Government 28%
Lottery run by a State Government means when the organising state and the state where the lottery is conducted are same for e.g. Lottery is organised by Assam state government and is also conducted in Assam.
Lottery authorised by State Government is where both the states are different for e.g. Lottery run by Assam state government is conducted outside the state of Assam.
Also, as clarified in the aforesaid circular, the price written on the face of the lottery is inclusive of tax. Thus, taxable value of a lottery priced Rs. 100 shall be
If run by the state government 100/1.12 = 89/-
If authorised by the state government 100/1.28 = 78/-
GST council in its 17th Council meeting deliberated extensively with regard to the taxation on lottery and decided tax rates and manner of taxation of lottery. It concluded that tax on lotteries sold by state government to lottery distributors or the sole selling agent appointed by the state government shall be on reverse charge basis and all further transfer of lottery by distributors/ sole selling agents to agents/ stockists and below shall be exempted.
Hence, lottery in its very first point is taxable under Section 9(3) of the Act and is exempted thereafter. Section 31 (2)(f) of the Act requires that the registered person who is liable to pay tax on reverse charge mechanism under Section 9(3) of the Act shall issue an invoice in respect of the goods received by him from the supplier who is not registered on the date of receipt of goods or services. In the given case, the distributor or the sole selling agent shall raise a tax invoice on himself while receiving the lottery from the state government. Invoicing rules on lottery transferred thereafter, below the distributor or the sole selling agent, are hence not applicable.
In common parlance, anything which comes as a fortune through lucky draw or through any permutation and combination is considered to be a lottery won. But the same is not true. Literal meaning of lottery is raising money by selling numbered tickets and giving prizes to the holders of numbers drawn at random. Further, lottery as per Lotteries (Regulation) Act, 1998 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.
In the instant case, lottery are not purchased by the customers of the commercial establishments rather they get entitled to it with purchase of a minimum amount of merchandise. Hence, the lucky draw/ coupon etc. organised by commercial establishments during festive season cannot be considered as lottery.