FinMin rationalises service tax on lottery tickets

The government has rationalised the service tax liability on sellers and distributors of lottery tickets by giving them the option to pay tax at flat rate based on the face value of tickets.

Under the new scheme, a distributor or lottery selling agent can opt to pay flat service tax of Rs 6,000 on every Rs 10 lakh of aggregate face value of lottery tickets printed by the organising state for a draw, the finance ministry said in a notification.

This amount will apply on those schemes where the guaranteed prize payout is more than 80 per cent.

In the Budget 2010-11, the government had introduced service tax on promoting, marketing, or organising of games of chance, including lottery, which is levied at 10 per cent.

The players in this sector resented the service tax, saying that the move eats into their commissions, making their businesses unviable.

According to Deloitte India Leader, Indirect Tax, Prashant Deshpande, "This is rational way of taxing the services rendered by distributors and selling agents for the lottery schemes. The sector will be benefited from this move as it would reduce the tax burden."

The finance ministry further said, a distributor or selling agent will have to pay service tax of Rs 9,000 on every Rs 10 lakh of aggregate face value of lottery tickets printed by the organising state for a draw for the lottery schemes, where the guaranteed prize payout is less than 80 per cent.

It added that a distributor or selling agent of lotteries should decide on the option within one month of the beginning of each financial year.

Once they opt for this composition scheme, they cannot withdraw it during the remaining period of the financial year.