Applicability of service tax on lottery, Service Tax

[MANASH MUKHERJEE]

Dear Sir,

My query is that whether selling lottery tickets by a state government authorities through authorized distributor is taxable or falls under negative list.If taxable, who will pay the service tax,

Posts / Replies

[YASHAVANTH RENUKA]

Dear Manash,

Under Sec. 65 ( 105) zzzzn of service tax finance section, on "Services of Promoting, Marketing & Organizing of games of chance including Lottery, Bingo & Lotto" service tax is applicable. Accounting code is 00440595.

[Rajagopalan Ranganathan]

Sir,

As per Sl. No. 1C of Notification No. 30/2012-ST dated 20.6.2012 as amended in respect of services provided or agreed to be provided by a selling or marketing agent of lottery tickets in relation to lottery in any manner to a lottery distributor or selling agent of the State Government under the provisions of the Lottery (Regulations) Act, 1998 (17 of 1998) 100% of service tax is payable by any person liable for paying service tax other than the service provider. That is the service receiver is liable to pay 100% of service tax payable.

[Ganeshan Kalyani]

The said service is a taxable service and falls under reverse charge mechanism. The receiver of the service is liable to pay 100% service tax.

[KASTURI SETHI]

I support the views of the experts. I also add further information as under:

D.O. F. No. 334/8/2016-TRU, dated 29-2-2016

4.2 Further amendments in Chapter V of the Finance Act, 1994 :

A. Lottery :

Section 4(c) of the Lotteries (Regulation) Act, 1998 provides that the State Government shall sell the tickets either itself or through distributors or selling agents. Thus, as per the provisions of the Lotteries (Regulation) Act, 1998, the transaction between the State Government and the distributors or selling agents is on principal to agent basis. Any contract contrary to the aforesaid legal provisions is ultra vires the provisions of Indian Contracts Act, 1872 and thus not legally enforceable. Explanation 2 in section 65B(44) is proposed to be amended to clarify that activity carried out by a lottery distributor or selling agents of the State Government under the provisions of the Lotteries (Regulation) Act, 1998 (17 of 1998), is leviable to service tax.’

(Clauses 145 of the Bill refers)

C.B.E. & C. Letter D.O.F. No. 334/5/2015-TRU, dated 19-5-2015

2.5 An entry in the Negative list covers betting, gambling or lottery [Section 66D(i)]. This entry has been amended by section 109(3) of the Finance Act, 2015 so as to include an explanation that “betting, gambling or lottery” shall not include the activity carried out by a lottery distributor or selling agent in relation to promotion, marketing, organising, selling of lottery or facilitating in organising lottery of any kind, in any other manner. The objective of making these exclusions was to make it explicitly clear that while lottery per se is not subject to service tax, aforesaid services in relation to lottery will be taxable. This will come into effect from 1st June, 2015. (Notification No. 14/2015-Service Tax, dated 19th May, 2015 refers).

2.6 In respect of certain services like money changing service, service provided by air travel agent, insurance service and service provided by lottery distributor and selling agent, the service provider has been allowed to pay service tax at an alternative rate subject to the conditions as prescribed under rules 6(7), 6(7A), 6(7B) and 6(7C) of the Service Tax Rules, 1994. Consequent to the upward revision in Service Tax rate, the said alternative rates shall also be revised proportionately.