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Promoting, Marketing or Organizing of Games of Chance, including Lottery. [Sec 65(105)(zzzzn)]
Effective upto 30th June, 2012
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Landmark Service Tax Judment - Promoting, Marketing or Organizing of Games of Chance, including Lottery

INTRODUCED : With Effect From 1st July 2010
 
Contents
Scope
Exemption
Relevant Notifications / Circulars
Landmark Judgements
Accounting Code
Service Tax 00440595
Interest 00440596
Penalty 00441470
 
DEFINITION:

According to Section 65 (105) (zzzzn) taxable service means any service provided or to be provided to any person, by any other person, for promotion, marketing, organising or in any other manner assisting in organising games of chance, including lottery, Bingo or Lotto in whatever form or by whatever name called, whether or not conducted through internet or other electronic networks;

 
SCOPE:
TOP

Promotion, marketing etc. of lottery and similar games of chance presently figures as part of Business Auxiliary Service (BAS). This is now being introduced as an independent entry in the list of taxable services

Lotteries are conducted by various State Governments and are regulated by a Central legislation, i.e. the Lotteries (Regulation) Act, 1998. The said Act provides the conditions, restrictions and prohibitions pertaining to organization of lotteries conducted by the State Governments. Section 4 of the said Act enjoins upon the State Governments to print lottery tickets bearing the imprint and the logo to ensure authenticity of the lottery ticket. It also provides that ‘the State Government shall sell tickets either itself or through distributors or selling agents’.

The State Governments appoint distributors to advertise, promote and sell lottery tickets. Besides the State Governments organizing lotteries, some other games of chance are also being organized. The services provided for promotion or marketing or organizing such games of chance are now being covered by introducing a separate taxable service to cover the services in connection with games of chance, organized conducted or promoted by the client, in whatever form or by whatever name called (such as lottery, lotto) under the ‘Games of chance’ service.

It has been clarified that Service Tax would be applicable also to such games conducted online. Consequently, the Explanation appearing under ‘Business Auxiliary Service’ is being deleted.

 
SERVICE TAX EXEMPTIONS:
TOP

(a) Small service providers whose aggregate value of taxable services rendered in the previous year has not exceeded the limit of Rs. 10,00,000/-  (Service Tax Notification No. 08/2008-S.T., dated 01.03.2008)

(b) Services provided to the United Nations or International Organisations

(c) Services provided to Special Economic Zones (SEZ) units (including unit under construction) and SEZ developers

(d) Services which are exported as per ‘Export of Services’ Rules

(e) Services provided for official or personal use of foreign diplomatic missions and family members of diplomatic missions.

(f) Services provided by Reserve Bank of India

(g) Out of total value of service provided proportionate value of goods and material provided by the Service Provider

 
SERVICE TAX EXEMPTIONS:
TOP
  Notification No. 50/2010-S.T., dated 08-10-2010 (Effective from 08-10-2010) Exemption to person marketing the lottery tickets other than the distributors or selling agents appointed or authorized by the lottery organising State
Notification No. 49/2010-ST. dated 08-10-2010 (Effective from 08-10-2010) Introduction of composition scheme for the distributors or selling agents appointed or authorized by the  lottery organising State
Notification No. 36/2010-ST, dated 28-06-2010 Exemption for value of service received in advance prior to 01-07-2010
 
RELEVANT SERVICE TAX CIRCULARS/INSTRUCTIONS/TRADE NOTICES:
TOP
Service Tax D. O. Letter (F.No.334/03/2010-TRU), dated 01-07-2010 Clarification regarding issuance of notifications after enactment of the Finance Act, 2010 including the one in relation to exemption on advance received by service providers of this service
  Service Tax CBEC Instruction Letter D.O.F. No.334/1/2010-TRU, dated 26-02-2010
 
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Case Laws Related

  • STO 2009 SC 857
  • Interpretation of Statute: Retrospective Effect: When a new type of tax is introduced or a new concept of tax is introduced so as to widen the net, it, in our opinion, should not be construed to have a retrospective operation on the premise that it is clarificatory or declaratory in nature. If a substantive law is introduced, it will have no retrospective effect.
     
    Revenue Vs Service: Raising of revenue by the State, by itself cannot amount to rendition of any service. For the purpose of invoking the provisions of taxing statute a question assumes significance for the purpose of ascertaining as to whether the same amounts to rendition of service within the meaning of the sub-clause.

  • STO 2007 Sikkim 361
  • Service Tax: Business Auxiliary Services: Sale of Lottery tickets: As such those would not be goods within the meaning of the definition clause in the Sale of Goods Act. If the lottery tickets are not goods, the writ petitioners cannot said to be rendering any service in relation to the promotion of their client's goods, or marketing of their client's goods, or sale of their client's goods.

  • STO 2007 Sikkim 362
  • Service Tax: Business Auxiliary Services: Sale of Lottery Tickets: Sale or promotional or marketing service: On a balance of circumstances it appears that the essence of the writ petitioner's business venture is that of a middleman, and if it is a middleman's venture, then the activity, properly so called, cannot but be promotion or marketing. There will be no interim order. (para 19,20)

     
     

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