• Jun 10, 24
• bhushanbjain
• 0 comment

The determination of value of supply for lottery, betting, gambling and horse racing in the context of Section 15 of the GST Act, 2017, is actually specified under Rule 31A of the CGST Rules, not directly in Section 15 itself. Here’s a breakdown of the key points:

For lotteries:

The value of supply for lotteries depends on whether it’s run by the State Government:

State-run lotteries:

Higher of two options:

100/128 of the face value of the ticket.

100/128 of the price notified in the Official Gazette by the organizing State.

Non-State-run lotteries:

Not specified under Rule 31A, likely subject to general valuation rules of Section 15 and Rule 30.

For betting, gambling and horse racing:

The value of supply is simply 100% of the face value of the bet or the amount paid into the totalizator.

Additional notes:

These value determination rules GST Act, 2017,  apply regardless of the transaction value mentioned in Section 15(1) of the GST Act.

For lotteries run by State Governments, the “Organizing State” refers to the definition in clause (f) of sub-rule (1) of Rule 2 of the Lotteries (Regulation) Rules, 2010.

                                     EXAMPLE

State: Tamil Nadu

Scenario 1: State-run lottery (run by and sold only within Tamil Nadu)

• Type of lottery: This falls under sub-rule (2)(a) of Rule 31A.
• Value of supply: 100/112 of the face value of the ticket OR the price notified in the Tamil Nadu Official Gazette, whichever is higher.
• Example: If the face value of a lottery ticket is ₹100 and the notified price is ₹110, the value of supply would be ₹110 (as it’s higher than 100/112 * ₹100 which is approximately ₹89.29).

Scenario 2: State-authorized lottery (sold in other states besides Tamil Nadu)

• Type of lottery: This falls under sub-rule (2)(b) of Rule 31A.
• Value of supply: 100/128 of the GST Act, 2017,  face value of the ticket OR the price notified in the Tamil Nadu Official Gazette, whichever is higher.
• Example: If the face value of a lottery ticket is ₹50 and the notified price is GST Act, 2017, ₹55, the value of supply would be ₹55 (as it’s higher than 100/128 * ₹50 which is approximately ₹39.06).

Scenario 3: Betting, gambling, or horse racing in a race club

• Value of supply: 100% of the face value of the bet or the amount paid into the totalizator.
• Example: If you place a ₹200 bet, the value of supply is also ₹200.

                                 FAQ QUESTIONS

General:

• Q: Are lottery, betting, gambling, and horse racing considered supplies under GST?
  • A: Yes, only lottery, betting, GST Act, 2017, and gambling are treated as supplies under GST. All other actionable claims (like games of chance in online gaming) are not considered supplies.
• Q: What section of the GST Act deals with the value of supply in these cases?
  • A: Section 15 of the GST Act defines the taxable value for various situations. However, specific rules for lottery, betting, gambling, and horse racing are laid out in Rule 31A of the CGST Rules, 2017.

Determination of Value:

• Q: How is the value of supply determined for lotteries GST Act, 2017,?
  • A: It depends on the type of lottery:
    • State-run lotteries: The value is considered to be 100/112 of the face value of the ticket or the price notified in the official gazette by the organizing state, whichever is higher.
    • Other authorized lotteries: The value is considered to be 100/128 of the face value of the ticket or the price notified in the official gazette by the organizing state, whichever is higher.
• Q: How is the value of GST Act, 2017, supply determined for betting, gambling, and horse racing?
  • A: The value is simply 100% of the face value of the bet or the amount paid into the totalisator.

Additional Points:

• Q: Are online versions GST Act, 2017, of these activities (e.g., online betting) taxed similarly?
  • A: Currently, the GST treatment of online gaming, casinos, and horse racing is under discussion. As of January 19, 2024, they’re not explicitly covered under the GST scope. However, the 50th GST Council meeting in July 2023 proposed a 28% GST levy on the full face value for these activities, with an amendment to the GST law expected soon.
• Q: Where can I find more information about these rules?
  • A: You can refer to the official Central Board of Excise & Customs (CBIC) website for FAQs and updates on GST:
  • Additionally, consulting a tax professional is recommended for specific situations and detailed guidance.

                                         CASE LAWS

Relevant Rule:

• Rule 31A(2)(a) & (b): These sub-rules determine the value of supply for GST Act, 2017, lotteries as follows:
  • State-run lotteries: 100/112 of the face value of the ticket or the price notified in the Gazette by the organizing state, whichever is higher.
  • State-authorized lotteries: 100/128 of the face value of the ticket or the price notified in the Gazette by the organizing state, whichever is higher.

Relevant Case Laws:

• Central Board of Indirect Taxes GST Act, 2017, and Customs (CBIC) Circular No. 124/13/2017-GST dated 16.12.2017: This circular clarifies that games of skill (like rummy) aren’t covered under betting or gambling and are excluded from GST under Schedule III of the CGST Act.
• Karnataka High Court Judgement in M/s Dream 11 Fantasy Private Limited GST Act, 2017, Vs. Union of India & Ors. (2019): This judgement reiterates the CBIC circular, stating that fantasy sports platforms like Dream11 operate on skill and aren’t subject to GST on betting/gambling grounds.

Additional Points:

• Rule 31A(3): This sub-rule states that the value of supply for betting, gambling, and horse racing is 100% of the face value of the bet or the amount paid into the totalisator.
• No specific case laws currently challenge the valuation methodology under Rule 31A.

Value of supply in cases where Kerala flood cess is applicable

1. Determine the value of supply as per Section 15 of the GST Act, 2017: This section defines the value of supply as the consideration received or receivable for the supply of goods or services, including incidental expenses like packing, freight, insurance, etc. (Unless these are separately charged and shown in the invoice).
2. Exclude the Kerala Flood Cess from the value of supply: Once you have GST Act, 2017, calculated the value of supply based on Section 15, you need to remove the amount of Kerala Flood Cess from it. This ensures that the cess is not levied upon itself, creating a double taxation scenario.

Example:

Let’s say you sell goods in Kerala with a selling price of INR 10,000. The applicable SGST rate is 5%, and the Kerala Flood Cess rate is 1%.

1. Value of supply as per Section 15:
   • SGST = (10,000 * 5%) = INR 500
   • Value of supply = 10,000 + 500 = INR 10,500
2. Value of supply for Kerala Flood Cess:
   • Kerala Flood Cess = (10,500 * 1%) = INR 105
   • Value of supply for cess = 10,500 – 105 = INR 10,395

Therefore, the Kerala Flood Cess would be calculated on INR 10,395, not INR 10,500.

It’s important to remember that the Kerala Flood Cess was initially introduced for two years but continues to be in effect due to its extension by the state government.

For further clarification:

• You can refer to Rule 32A of the CGST Rules, 2017, for the precise wording regarding the value of supply for the Kerala Flood Cess.
• You can also consult the FAQ on Kerala Flood Cess available on the Kerala Taxes website for additional information.

                                        EXAMPLE

Unfortunately, your question requires more specific information to provide an accurate example of the value of supply for Kerala Flood Cess under Section 15 of the GST Act 2017 in a particular state in India. To calculate the value of supply correctly, I need details like:

• Type of Supply: Are you dealing with intra-state, inter-state, or import/export of goods or services?
• Specific State: You mentioned a specific state, but haven’t named it. Knowing the state is crucial as Kerala Flood Cess only applies within Kerala.
• Nature of Transaction: Is it a B2B (business to business) or B2C (business to consumer) transaction?
• Value of Invoice: Knowing the original invoice value before GST and other applicable taxes is essential.

                                 FAQ QUESTIONS

Q1. What is the “value of supply” for calculating Kerala Flood Cess under Section 15 of the GST Act, 2017?

A1. The value of supply for Kerala Flood Cess is defined in Rule 32A of the Kerala Goods and Services Tax Rules, 2017. It states that the value of supply shall be deemed to be the value determined under Section 15 of the GST Act, 2017, but excluding the Kerala Flood Cess itself.

Q2. Does this mean the cess is calculated on the transaction value before adding CGST and SGST?

A2. Yes, you are correct. The Kerala Flood Cess is calculated on the taxable value, GST Act, 2017, which is the transaction value of the goods or services excluding CGST, SGST, and any other levies.

Q3. Are there any exceptions to using Section 15 for determining the value of supply?

A3. No, as of today (19 January 2024), GST Act, 2017,  there are no specific exceptions in the rules regarding using Section 15 for value of supply for Kerala Flood Cess. However, it’s always advisable to check for any recent updates or amendments to the Kerala Flood Cess provisions or Rule 32A.

Q4. Does the cess apply to all supplies covered by Section 15?

A4. No, the Kerala Flood Cess is only applicable to certain categories of supplies, as GST Act, 2017, per its specific provisions. These categories include intra-state B2C supplies of goods and services listed under Schedule II, III, and IV of the Kerala State Tax on Goods and Services Rules, 2017. Certain specific goods like gold and diamonds under Schedule V attract a lower cess rate but are still covered.

Q5. Where can I find more information about the Kerala Flood Cess and its applicability?

A5. You can find detailed information on the official website of the Kerala Department of Tax Administration or refer to GST Council notifications and circulars relevant to the cess. Additionally, consulting with a tax professional experienced in Kerala GST would be helpful for specific guidance on your situation.

                                  CASE LAWS

• The Kerala Flood Cess was levied at 1% on certain goods and services in GST Act, 2017,  Kerala for a two-year period starting from July 1, 2019.
• The value of supply for calculating the cess is defined in Rule 32A of the Kerala Goods and Services Tax Rules, GST Act, 2017, 2017. This rule states that the value of supply for the cess is the same as determined under Section 15 of the GST GST Act, 2017,  Act, excluding the Kerala Flood Cess itself.
• Section 15 of the GST Act provides the general principles for determining the value of supply for taxable transactions.

VALUE OF SUPPLY OF SERVICES IN CASE OF PURE AGENT

Section 15 of the GST Act, 2017, deals with the determination of the value of supply GST Act, 2017, of goods or services. However, it doesn’t specifically address the value of supply in the case of a pure agent. Determining the value for a pure agent falls under Rule 33 of the CGST Rules, 2017.

Here’s how the value of supply is determined for a pure agent under Rule 33:

• Commission or remuneration: If the pure agent receives a commission or remuneration for their services, then the value of supply will be the amount of commission or remuneration received.
• Reimbursement of expenses: If the pure agent receives only reimbursement of expenses incurred on behalf of the principal (the person for whom the agent acts), then the value of supply will be zero. However, the agent can charge a service fee if permitted by the agreement with the principal, and that service fee will become the value of supply.
• Combination of both: If the pure agent receives both a commission/remuneration and reimbursement of expenses, then the value of supply will be the sum of the commission/remuneration and the service fee, if any.

Important points to remember:

• For the rule to apply, the agent must be a “pure agent”. This means they act solely on behalf of the principal and do not have any personal interest in the supply.
• The value of supply determined under Rule 33 is subject to GST at the applicable rate.

EXAMPLE

Pure Agent:

A pure agent acts solely on behalf of another person (principal) in procuring goods or GST Act, 2017, services from a third party. They don’t own or supply the goods/services themselves but facilitate the transaction between the principal and the third party.

WSEC.15 (Valuation Rule 33 under GST Act):

This rule defines the value of supply in specific cases, including for GST Act, 2017,  pure agents. As per WSEC.15, the value of supply for a pure agent is:

• Total amount charged to the principal: This includes the agent’s service fees, commission, or any other charges levied by the agent.
• Plus: Any amount received by the agent on behalf of the third party (like GST Act, 2017, taxes, fees, charges paid to authorities on the principal’s behalf).

However, certain expenditures or costs incurred by the pure agent as per the contract with the principal are excluded from the value of supply:

• Actual amount incurred to procure the goods/services for the principal from the third party.
• Taxes, fees, or charges paid on behalf of the principal to government authorities (but not to the third party).

Examples of Value of Supply for Pure Agent:

1. Travel Agent:

• Agent charges principal Rs. 10,000 for booking flight tickets (service fee).
• Travel agent pays Rs. 1,500 as airport tax on behalf of the principal.

Value of supply: Rs. 10,000 (service fee) + Rs. 1,500 (airport tax) = Rs. 11,500

2. Import/Export Agent:

• Agent charges principal Rs. 5,000 for customs clearance services.
• Agent pays Rs. 2,000 customs duty and Rs. 300 port charges on behalf of the principal.

Value of supply: Rs. 5,000 (service fee) + Rs. 300 (port charges) = Rs. 5,300 (customs duty excluded as paid to government)

3. Corporate Lawyer:

• Lawyer charges company Rs. 20,000 for company registration.
• Lawyer pays Rs. 5,000 registration fees and Rs. 1,000 name approval fees to the Registrar of Companies on the company’s behalf.

Value of supply: Rs. 20,000 (service fee) = Rs. 20,000 (registration and name fees excluded as paid to government)

These are just a few examples, and the specific value of supply will depend on the exact service provided by the pure agent and the terms of the contract with the principal.

FAQ QUESTIONS

1. Who is a “pure agent” under GST GST Act, 2017,?

A pure agent is a person who:

• Enters into a contractual agreement with the recipient of a supply to act as their agent.
• Incurs expenditure or costs on behalf of the recipient related to the supply of goods or services.
• Does not add any markup or profit on the incurred expenses.
• Claims reimbursement from the recipient at actuals, without including it in their own supply value.

2. How is the value of supply determined for a pure agent under WSEC.15?

The value of supply for a pure agent is the amount of expense or cost they actually incurred on behalf of the recipient. This excludes any commission, fees, or profits earned by the agent.

3. What documentation is required for a pure agent to claim reimbursement?

The pure agent should maintain proper records and documents to support the expenses incurred on behalf of the recipient. These may include:

• Copy of the agreement with the recipient
• Invoices or bills for the expenses incurred
• Payment receipts for the expenses paid

4. What happens if the pure agent charges a commission or mark-up on the expenses?

If the pure agent charges a GST Act, 2017, commission or mark-up on the expenses, they will lose the benefit of pure agent status. The entire amount, including the mark-up, will be considered their taxable supply.

5. What are some examples of pure agent services?

• A customs broker incurring transportation costs for an import consignment on behalf of the importer.
• A travel agent booking flight tickets and hotel accommodation for a client.
• A marketing agency incurring advertising expenses on behalf of a client.

6. Where can I find more information about the pure agent concept under GST?

• Circular No. 45/13/2017-GST dated 6th September 2017 from CBIC
• Notification No. 14/2017-GST dated 21st July 2017 from CBIC
• “Pure Agent Concept in GST” document from CBIC
• Frequently Asked Questions on the GST Council website (gstcouncil.gov.in)

CASE LAWS

The value of supply of services in case of a pure agent under WSEC.15 of the GST GST Act, 2017, Act, 2017, is determined by excluding the expenditure or costs incurred by the agent as a pure agent of the recipient, if all the following conditions are satisfied:

• Contractual Agreement: The pure GST Act, 2017,  agent must have a contractual agreement with the recipient to act as their pure agent for incurring expenditure or costs in the course of supplying goods or services.
• Acting on Behalf of Recipient: The pure agent must act solely on behalf of the recipient and not in their own interest.
• Limited to Third-party Supplies: The expenditure GST Act, 2017,  or costs incurred must be for procuring goods or services from a third party for the recipient.
• Actual Reimbursement: The pure agent must receive only the actual amount incurred to procure such goods or services, without any markup or commission.
• Separate Services: The services provided by the GST Act, 2017, pure agent on their own account and the services procured as a pure agent must be distinct and identifiable.

If these conditions are met, then the value of supply for the pure agent’s service will be calculated excluding the costs incurred for the recipient. This means that GST will not be levied on those costs.

Relevant Case Laws:

• AAR Chennai Order No. 22/2023-ARA: This ruling clarified that SIPCOT GST Act, 2017, maintenance charges collected from allotted are not taxable under GST as they are considered expenditure incurred as a pure agent by SIPCOT on behalf of the allotted.
• AAR Goa Order No. 09/2022-ARA: This ruling held that a travel agency acting as a pure agent for booking hotels and transportation for its clients, and only recovering the actual costs, is not liable to pay GST on such expenses.

RATE OF EXCHANGE OF CURRENCY, OTHER THAN   INDIAN RUPEES, FOR DETEMINATION OF VALUE

1. Goods:

• Rule 34(1) of the CGST Rules: The applicable rate of exchange for taxable GST Act, 2017,  goods is notified by the Central Board of Indirect Taxes and Customs (CBIC) under section 14 of GST Act, 2017, the Customs Act, 1962. This rate typically reflects the selling rate of exchange for that currency on the date of the supply (as defined in section 12 of the GST Act). You can find the notified rates on the CBIC website or through official notifications.

2. Services:

• Rule 34(2) of the CGST Rules: The applicable rate of exchange for taxable GST Act, 2017, services is based on generally accepted accounting principles (GAAP). This usually involves using the average rate of exchange prevailing during the period the service was rendered (as defined in section 13 of the GST Act). There’s no specific notification issued by CBIC in this case.

Note:

• Option 1.15 under the GST Act doesn’t directly GST Act, 2017,  relate to foreign currency exchange rates. It refers to a specific valuation option available to foreign exchange service providers for determining the taxable value of their services. This option allows them to apply a fixed percentage on the gross amount of currency exchanged, depending on the transaction value.

EXAMPLE

. Supply of Goods or Services involving foreign currency:

• Scenario: A company in Maharashtra imports machinery from Germany for GST Act, 2017,  €10,000. The date of import is considered the “date of supply” for GST purposes.
• Determining value:
  • Option 1: Use the applicable reference rate for EUR as determined by GST Act, 2017, the Reserve Bank of India (RBI) on the date of import. Let’s assume the rate is ₹85/EUR. The taxable value would be INR 850,000 (10,000 EUR * 85).
  • Option 2: If tax invoices for the imported goods are unavailable, the registered person can estimate the value based on the prevailing market price of similar goods in India on the date of import.

2. Foreign currency exchange service:

• Scenario: A money exchange GST Act, 2017, bureau in Kerala converts USD 1,000 for a customer. The bureau applies a service charge of 1%.
• Determining taxable value:
  • Option 1: Use the gross amount of USD exchanged (USD 1,000) GST Act, 2017, multiplied by the applicable reference rate for USD as determined by RBI on the date of exchange. Assuming the rate is ₹80/USD, the taxable value would be INR 80,000 (1,000 USD * 80). The GST liability would be calculated on this value considering the specific service tax rate for money exchange services.
  • Option 2: As per GST guidelines GST Act, 2017,  for money exchange services, the supplier can also choose a fixed fee structure based on the transaction amount.

FAQ QUESTIONS

• Q: Who needs to consider exchange rates under GST?
  • A: Any registered person supplying or receiving taxable goods or services in a currency other than Indian rupees GST Act, 2017, (INR) needs to determine the value in INR for GST purposes.
• Q: What are the different rules for goods and services?
  • A: The rate of exchange for goods is defined by the Central Board of GST Act, 2017, Indirect Taxes and Customs (CBIC) under section 14 of the Customs Act, 1962, for the date of supply. (Rule 34(1))
  • For services, the rate is determined as per generally accepted accounting principles (GAAP) GST Act, 2017, for the date of supply. (Rule 34(2))

Specific Scenarios:

• Q: How do I find the applicable exchange rate for goods?
  • A: You can access the notified rates through the CBIC website or GST Act, 2017, publications. Alternatively, consult a chartered accountant or tax advisor for assistance.
• Q: What if I don’t have the exact date of supply for services?
  • A: Use the rate prevailing on the date the invoice is issued or the payment is received, whichever is earlier.
• Q: What happens if the invoice for inputs (goods used in production) is not available?
  • A: Estimate the value based on the prevailing market price of the goods on the relevant date specified in section 18 or 29 of the GST Act.
• Q: Can I use a different rate than the specified ones?
  • A: No, except in specific situations like foreign currency exchange services, where defined rules apply

CASE LAWS

1. Determination of Value under CGST Rules:

• Rule 34 of the CGST Rules, 2017: This rule prescribes the methodology for determining the exchange rate for transactions involving foreign currency:
  • Goods: For taxable goods, the applicable rate is notified by the Board under Section 14 of the Customs Act, 1962, GST Act, 2017, for the date of supply.
  • Services: For taxable services, the rate is determined as per generally accepted accounting principles (GAAP) GST Act, 2017,  on the date of supply.

2. Interpretations by GST Authorities:

• Circular No. 34/18/2017-GST dated 05.06.2017: GST Act, 2017, This circular clarified that the reference rate for goods shall be the “seller’s selling rate” notified by the RBI under Section 14 of the Customs Act.
• Circular No. 10/17/2017-GST dated 29.06.2017: GST Act, 2017, This circular further explained the application of GAAP for service transactions involving foreign currency, suggesting that the average rate for the relevant period could be used.

3. Relevant Case Laws:

• M/s. Hindustan Aeronautics Ltd. vs. UOI [2009 (108) ELT 837]: While not GST Act, 2017, directly related to GST, this case established that the “seller’s selling rate” under Section 14 of the Customs Act is the correct method for converting foreign currency for customs valuation purposes.
• Commissioner of Central Excise & Customs, Jaipur vs. M/s. Hindustan Zinc Ltd. [2014 (307) ELT 549]: This case reiterated the use of the “seller’s selling rate” for valuation of imported goods.

4. Recommendations:

• In the absence of GST Act, 2017, specific case laws on GST, consulting the aforementioned provisions and interpretations can provide guidance.
• For specific queries or complex scenarios, seeking advice from a qualified tax consultant is recommended.