In the earlier tax regime, no VAT (Value added Tax) was levied on lotteries, but service tax was levied at the rate of 1.28% or.82% on the face value of the lottery tickets depending on the prize money pay-out. After GST regime, GST is levied on the face value of the tickets without taking into account the prize money component. The central government has imposed GST of 12% on sale of lotteries within the same State and a GST of 28% if the sale is done outside the state i.e. in other states of the country.
What is GST?
- GST i.e. Goods and Services Tax is an indirect tax that came into effect on July 1, 2017. It replaced many existing indirect taxes such as Value Added Tax (VAT), services tax, excise, etc.
- GST is levied on the supply of goods and services.
- The GST regime has three components- Intra-state sales, State GST and Central GST.
- It also has different tax slabs- 0%, 5%, 12%, 18% and 28%. The goods and services are divided in different categories and then tax is levied as per different slabs.
- The GST Act was passed in March 2017.
Pleas against classifying lottery as goods
A set of pleas were filed by various lottery dealers claiming that Central government had wrongfully classified lottery as goods”. The petitioners claimed that lotteries are just piece of paper and it is wrong to classify them as goods.
Supreme Court upholds that GST will be levied on sale of lotteries
The Supreme Court has upheld that the Goods and Service Tax (GST) shall be imposed on the sale of lotteries, betting and gambling. The apex court also highlighted that the GST Act 2017 define ‘Goods’ to include ‘actionable claims’ and included only three categories of actionable claims, i.e., lottery, betting and gambling, to levy GST. The court said that the defining of lotteries as goods is not wrong as it does not violate any constitutional provision nor it conflicts the definition of goods under Article 366(12). The decision was given by a bench of 3 judges- Justice R Subhash Reddy, Ashok Bhushan, and MR Shah.
