When GST was introduced, most people assumed it would be pretty straightforward: you buy something, GST gets charged on the price you pay. But the moment you deal with things like lottery, casinos, betting, horse racing, online gaming, the normal valuation rules fall apart. Why?
Because these industries don’t work on simple “price per unit” logic. Their value is based on chance, prize pools, stakes, bets, face value, guaranteed payouts, and so many variables that traditional Section 15 valuation doesn’t make sense.
That’s exactly why the GST Act created Special Valuation Rules — Rule 31A & 31B for lottery, betting, gambling, horse racing, casinos, and (recently) online gaming.
1. Why Special Valuation Is Needed for Lottery, Casino, Gaming?
Normally, GST is charged on transaction value. But what is “transaction value” in gaming or lottery?
Let’s think:
- When you buy a lottery ticket, are you paying for the paper? No.
- When you enter a casino, are you buying a “good”? No.
- When you participate in online gaming, what exactly are you “buying"?
You’re essentially entering into a chance-based activity. The value isn’t in the paper or in an entry slip. It’s in the stake, face value, bet placed, chips issued, or game credits.
So GST needs a special formula to decide:
- What is the value on which GST should be charged?
And that’s what Rule 31A / 31B do.
2. Special Valuation Rule: Lottery (Rule 31A(2))
Lottery in India is highly regulated. Under GST, lottery valuation follows a STRICT formula.
There are 2 types:
- Lottery run by State Government
- Lottery authorized by State Government
GST valuation formula is different for both.
Let’s break it down.
2.1 Lottery Run by State Government
This means the state prints and runs the lottery.
“Valuation = Face value of ticket or price notified by Government, WHICHEVER IS HIGHER.”
That statement changes everything.
Example (Simple)
- Face value of ticket = ₹100
- Government notified price = ₹120
GST Value = ₹120
Even though buyer paid ₹100, GST is on ₹120.
2.2 Lottery Authorized by State Government
This is when private companies run the lottery but the State authorizes it.
“Valuation = 100/128 × Price notified by State or face value, whichever is higher”
This is a special formula.
Example
- Face value = ₹100
- Notified price = ₹120
- Step 1 → Select higher = ₹120
- Step 2 → Apply formula:
Value = 100/128 × 120 = ₹93.75 (rounded)
GST is applied on this value.
This rule exists because authorized lotteries involve private margin components.
3. Special Valuation: Betting, Gambling & Horse Racing (Rule 31A(3))
This one is easier to understand:
“Value of Supply = 100% of the face value of the bet or the amount paid into the totalisator.”
Meaning:
- Whatever amount the person bets
- Whatever stake they put in
- Whatever value is placed in the pool
GST is on that full amount.
Example
A person bets ₹2,000 on a horse race.
- Value of supply = ₹2,000
- GST = ₹2,000 × applicable rate
No deductions. No adjustments. No winnings-related reduction.
4. Casino Valuation (Rule 31A(3) Explanation)
Casinos are a special category because players buy chips.
Rule says:
“Value = Total amount paid for buying tokens/chips (or amount paid for participating in games)”
So if you enter a casino and buy chips worth ₹10,000:
- GST Value = ₹10,000
- GST Rate = as per current rate on casino gaming (28% in most states)
Example (Realistic)
- Person walks into a casino.
- Buys casino chips worth ₹15,000.
- Plays with them.
- May win or lose. Doesn’t matter.
GST applies on ₹15,000.
5. Special Valuation for Online Gaming (Rule 31B)
Online gaming recently saw a HUGE GST reform. GST Council brought clarity by treating online gaming differently (especially when played for stakes).
Rule 31B says:
“Value of supply = Total amount paid / deposited by the player, excluding GST.”
Not the winning amount. Not the gaming platform’s commission. Not the margin.
The entire amount deposited for playing is the value.
Example
A user deposits ₹1,000 into an online rummy app.
- GST Value = ₹1,000
- GST = ₹1,000 × 28% = ₹280
Even if platform charges only ₹50 as commission, GST is on the full ₹1,000.
6. Combine All Special Valuations into One Simple Diagram
Here’s a super easy visual breakdown:
Special Valuations Under GST
7. Numerical Questions
Let’s move into exam-style questions.
Question 1: Lottery Run By Government
- Face value = ₹80
- Notified price = ₹110
- Distributor price = ₹90
GST Value?
- = Higher of face value or notified
- = ₹110
Question 2: Lottery Authorized by Government
- Face value = ₹100
- Notified price = ₹120
- Valuation = 100/128 × Higher value
- Higher = ₹120
- Value = 100/128 × 120
- = ₹93.75
Question 3: Casino Chips
- Player buys chips = ₹12,000
- GST Rate = 28%
GST = 12,000 × 28% = ₹3,360
Total = ₹15,360
Question 4: Horse Racing
Player bets ₹5,000 on Horse No. 6.
- Value = ₹5,000
- GST = ₹5,000 × 28% = ₹1,400
Question 5: Online Gaming (Skill + Chance)
- User deposits = ₹2,000
- Platform fee = ₹200
GST Value = ₹2,000, Not ₹200.
GST = 2,000 × 28% = ₹560
8. Why 100/128 Formula for Lottery? (Easy Explanation)
Many students get confused by “100/128”. Here's the simplest explanation:
- GST rate on lottery = 28%
- 128 = 100 + 28, So government uses back-calculation formula to extract value when the price includes GST.
Formula: Value = (Price × 100) / 128
That’s it.
9. Common Doubts Students Face
Should prize money be excluded?
NO. GST is on amount paid for entry/chips/bet, NOT on winnings.
Is platform commission considered value in gaming?
NO. GST is on full stake amount.
Can casinos reduce value by deducting complimentary chips?
NO. Promos/complimentary chips have no effect.
Can GST be charged only on margin in lottery?
NO. Value formula is fixed.
Can gaming platforms split “game of skill” and “game of chance”?
Under special valuation, NO. Stake-based games fall under 31B regardless.
10. Diagram – Quick Differences (Lottery vs Casino vs Betting vs Gaming)
Lottery vs Casino vs Betting vs Gaming
11. Practical Insights for Businesses
Lottery distributors
Must use notified price for valuation; invoice price irrelevant.
Casinos
Need to track all chip sales, including digital chips.
Race clubs
Must maintain totalisator records for every event.
Gaming apps
Must compute GST on every deposit, not margin.
No deductions allowed for promos
Buy 1000 chips + get 200 free → GST still on 1000 chips value.
12. Why These Rules Are Strict?
Because these industries:
- involve huge volume of small transactions
- have risk of manipulation
- run high cash economy
- depend on chance, not product
- need transparent valuation
GST Council made these rules to avoid undervaluation and leakage.
