The General Exemption Rule for Gambling Services
The provision of services by means of lotteries, gambling and profitable games is exempt from VAT under article 171 of the Tax Code of Georgia. This norm sits in the list of exemptions for a separate category of operations and creates, for a gambling operator, the foundation on which it prices its own services and reports to the tax organ. Precision is essential: the exemption covers the provision of services by means of lotteries, gambling and profitable games — with the exception of certain services carved out by another norm of the Code, whose detailed content must be verified against precisely that norm.
Establishing the exact basis of the exemption is practical in every case where the operator's revenue is formed from different types of activity: article 171 concerns gambling services specifically and does not automatically extend to everything the operator does. Therefore the tax qualification of each transaction must be assessed separately.
What „Exemption Without the Right of Deduction“ Means for an Operator
The exemption under article 171 is of a special character: it operates without the right of VAT deduction. In practice this means that on gambling services the operator does not add VAT and does not pay to the budget the VAT arising from the service rendered; but at the same time it cannot deduct the VAT paid on goods and services acquired for the activity either — the VAT of purchases remains a cost of the operator.
This construction must be reflected in the budget as a separate line: when planning investment and operating purchases, the comparison of prices is made precisely by taking into account the absence of the deduction right. For an operator whose revenue comes mainly from exempt activity, VAT accounting and documentation begin to work under a different logic than for an ordinary payer.