Composition Scheme for Lotteries - Service Tax Rules Amended
A new sub rule 7C is inserted in Rule 6 of the Service Tax Rules to provide for an optional Composition Scheme for the Distributor or Selling Agents. They can pay Rs. 6000/- or Rs. 9000/- on every Rs. 10 Lakh value of tickets printed, depending on whether the guaranteed prize payout is more than or less than 80% - the rule does not specify 80% of what! And does the prize payout include the commission paid to the agent? (The Mizoram Lottery announces a payout which includes the agent's incentive)
And if there are more than one Distributor or Selling Agent, is each one required to pay this Rs. 6000 or Rs. 9000?
Consequently, the government has exempted persons other than distributors or selling agents, marketing lottery tickets, from the whole of service tax, if the optional composition scheme is availed of by the distributor or selling agent.
Taxing Lottery had been a taxing proposition for the government, not always leading to success. The lottery business in India is a big-time lottery for the organisers and ticket sellers with a turnover of over a lakh of Crores a year. Recently Congress Spokesman Abhishek Singhvi almost lost his job for trying to defend a lottery king in Kerala High Court.
There is said to be a Lottery Mafia in operation in several States and the whole scheme is full of frauds with absolutely no control. Interestingly the small North Eastern states are the origin for many lotteries and most of the tickets are sold deep down South in Kerala. Technology has only added a new dimension to the fraud. While many states have banned lotteries, internet knows no geographic boundaries and online lotteries are doing brisk business.
Unfortunately governments have been interested only in getting their pound of flesh by taxes, instead of curbing the menace, which is simply an organised way of looting the poor people.
And now the service tax department adds to the confusion and ultimate litigation. Apparently this has been done on the request of the lottery agents as some newspapers have already reported about these notifications.
See : Notification No. , Dated : October 8, 2010 ,Notification No. , Dated : October 8, 2010 ,Lotteries (Regulation) Rules, 2010.