Under the GST law, the value of supply is the base on which tax is calculated. Normally, Section 15 of the CGST Act, 2017 states that the value of supply is the transaction value – i.e., the actual price paid or payable, provided the parties are not related and price is the only consideration.
However, not all supplies fit into this simple framework. Activities such as lottery, betting, gambling and horse racing are unique in nature. They involve actionable claims, large volumes of participants, and regulated prices. To avoid disputes and manipulation of taxable values, the government prescribed a special rule – Rule 31A of the CGST Rules, 2017 – which lays down how to compute the value of supply in these cases.
This rule was first inserted through Notification No. 03/2018 – Central Tax dated 23rd January 2018, and later simplified in March 2020 to bring uniformity in lottery valuation.
Applicability of Rule 31A
Rule 31A applies to:
- Lottery – whether organised by or authorised by State Governments
- Betting – placing stakes on uncertain outcomes
- Gambling – wagering activities involving money
- Horse Racing – specifically bets placed in a race club, either directly or through a totalisator system
Important: Since 1st October 2023, online gaming and casinos are governed by separate rules (Rule 31B and Rule 31C). Hence, Rule 31A now covers only lotteries and horse-racing-related betting/gambling.
Valuation in Case of Lottery – Sub-rule (2)
2.1 Current Provision (after 1 March 2020)
The value of supply of lottery is deemed to be:
100/128 × (higher of):
- The face value of the lottery ticket, OR
- The price notified in the Official Gazette by the Organising State.
This formula ensures that GST is calculated on a uniform deemed value, irrespective of discounts or commissions.
🔹Why 100/128?
Because the GST rate on lottery is 28%. By applying the factor 100/128, the rule essentially backs out the tax component from the gross price, giving the base value on which 28% GST is again levied.
Definitions (Explanation to Sub-rule 2)
- “Lottery run by State Governments” – A lottery which is permitted to be sold only within the organising State.
- “Lottery authorised by State Governments” – A lottery which is permitted to be sold in other States also, besides the organising State.
- “Organising State” – As defined in Rule 2(1)(f) of the Lotteries (Regulation) Rules, 2010. It means the State that organises the lottery.
👉 Note: These two categories (run vs authorised) were relevant earlier. From 1 March 2020, the distinction was removed, and all lotteries are valued using 100/128.
Example – Lottery
- Face value of ticket = ₹100
- Notified price = ₹95
- Higher value = ₹100
Taxable value = ₹100 × 100/128 = ₹78.13
GST @ 28% = ₹21.87
Total Price = ₹100 (inclusive of GST).
Valuation in Case of Betting, Gambling and Horse Racing – Sub-rule (3)
For betting, gambling or horse racing in a race club, the value of supply is:
100% of the face value of the bet OR the amount paid into the totalisator.
- A totalisator is the pari-mutuel betting system where all bets are pooled and then distributed among winners after deductions.
Here, the entire amount staked is considered the taxable value, leaving no scope for undervaluation.
Example – Horse Racing
- A person places a bet of ₹1,000 at a race club.
- Taxable value = ₹1,000
- GST @ 28% = ₹280
Total amount (inclusive of GST) = ₹1,280