BUDGET CHANGES IN NEGATIVE LIST

The following change in the negative list shall be applicable from the notified date after the enactment of Finance Bill, 2015:

Betting gambling or lottery [Clause (i) of Section 66D]

Finance Bill, 2015 has inserted the following explanation in clause (i) of section 66D-

"Explanation : For the purposes of this clause, the expression, 'betting gambling or lottery' shall not include the activity specified in Explanation - 2 clause (44) of section 65B".

Explanation - 2 inserted by Finance Bill, 2015 to section 65B (44) reads as under:

"Explanation 2. - For the purposes of this clause, the expression “transaction in money or actionable claim” shall not include--

(i) any activity relating to use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged;

(ii) any activity carried out, for a consideration, in relation to, or for facilitation of, a transaction in money or actionable claim, including the activity carried out--

by a lottery distributor or selling agent in relation to promotion, marketing, organising, selling of lottery or facilitating in organising lottery of any kind, in any other manner;
by a foreman of chit fund for conducting or organising a chit in any manner."

Finance Bill, 2015 has inserted an Explanation-2 in definition of 'service' (Clause 44 of section 66B) to specifically state the intention of the legislature to levy Service Tax on activities undertaken by lottery distributors and selling agents in relation to lotteries. Further, an explanation has been inserted in Clause (i) of section 66D (negative list) to the effect that such activities shall not be covered under negative list. Such activities shall not be considered as transaction in money or a actionable claim which are not covered under the scope of ‘service’.

Finance Bill, 2015 has inserted an explanation in clause (i) so as to exclude services of lottery distributor or selling agent in relation to promotion, marketing organizing, selling of lottery or facilitating in organizing lottery of any kind in any other manner from the scope of negative list. Thus, these services shall no longer be covered under negative list and be subject to levy of Service Tax. The intention in law has been to levy Service Tax on the services provided by distributors or selling agents of lottery.

In this regard, the “consideration for service would include amount retained by the distributor or selling agent of lottery from gross sale amount of lottery ticket, or, as the case may be, the discount received, that is the difference in the face value of lottery ticket and the price at which the distributor or selling agent gets such tickets.”

CBEC has clarified vide Letter No. DOF 334/5/2015-TRU dated 28.02.2015 as under -

'The intention in law has been to levy Service Tax on the services provided by:

(a) chit fund foremen by way of conducting a chit.

(b) distributor or selling agents of lottery, as appointed or authorized by the organizing state for promoting, marketing, distributing, selling, or assisting the state in any other way for organizing and conducting a lottery.

However, Courts have taken a contrary view in some cases, while in some cases the levy has been upheld.

An Explanation is being inserted in the definition of “service” to specifically state the intention of the legislature to levy Service Tax on activities undertaken by chit fund foremen in relation to chit, and lottery distributors and selling agents, in relation to lotteries [section 65 B (44)]. Further, an explanation is being added in entry (i) of section 66D to specifically state that these activities are not covered by the Negative List.'