In a first, GST Council votes to tax lotteries at uniform rate of 28%

Topics GST | lottery | GST rates

Finance Minister Nirmala Sitharaman at the 38th GST Council meeting, in New Delhi | Photo: PTI
In a first, the Goods and Services Tax (GST) Council on Wednesday resorted to voting to decide an issue. The controversial issue of the GST rate for lotteries was decided on the basis of voting, with the Council fixing a uniform tax rate of 28 per cent on both state and private lotteries with effect from March 1, 2020. All the earlier decisions by the Council had been taken through consensus. The move was a partial defeat for Kerala Finance Minister Thomas Isaac's proposal on whose insistence voting was conducted. 

“It (voting) was not imposed by the Council. It was not imposed by me as the chair. It was on the insistence of one member,” Finance Minister Nirmala Sitharaman told reporters after the meeting. 

Currently, there are dual rates for lotteries — 12 per cent tax on state-run lotteries and 28 per cent on state-authorised, or private, lotteries. Voting happened twice on the issue. The first time it was on whether there should be a uniform or dual rate. Seventeen states voted in favour of single rate and seven for a dual rate. Maharashtra, which was earlier for a uniform rate, voted for a dual rate this time. Then there was voting on whether there should be an 18 per cent or 28 per cent rate for lotteries. All voted for 28 per cent. 

Kerala favoured a dual rate for the two kinds of lotteries. Isaac had said if it came to a uniform rate, then the rate for private lotteries should not be lowered to 18 per cent, but the rate for government-run lotteries be raised to 28 per cent. 

The five-hour-long meeting of the Council also decided to block the input tax credit (ITC) for fake invoices in certain cases and further restrict the credit for invoices not uploaded in relevant forms to 10 per cent from the current 20 per cent of the eligible credit.  

“To check the menace of fake invoices, suitable action will be taken for blocking fraudulently availed ITC in certain cases," Revenue Secretary A B Pandey said.

However, no decision was taken on changing GST rates with the officers’ committee on revenue augmentation only presenting an account of the tax collected.

"The committee did not directly or indirectly give any suggestions on increasing or reducing GST rates. It was a matter of fact presentation of data and data alone," said Sitharaman. 

M S Mani, partner at Deloitte India, said the focus on revenue augmentation measures could lead to several anti-evasion measures in the coming months as the decision to block ITC in cases of fake invoices indicated. 

She also reiterated the Centre's commitment to pay compensation to the states in case they did not clock 14 per cent growth in GST revenues on the base year of 2015-16, even as some states expressed fears about the Union government's ability to do so. 

Besides lotteries, the Council decided to exempt the upfront amount payable for long-term lease of industrial or financial infrastructure plots by an entity in which the Centre or state governments have at least 20 per cent ownership. This exemption is currently available to those where the governments have at least 50 per cent stake. This would promote setting up of industrial and financial parks, said Pandey.

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