The lottery industry in India is feeling the pinch mainly due to the current Goods and Services Tax (GST). Ever since the new GST rate was rolled out by the BJP led government, it has significantly impacted the revenues of lottery operators. Last year we also reported how Mumbai authorities raided online lottery Parlours for tax evasion.
It has gotten bad enough that industry leader Sugal & Damani Group says that it has crippled the industry.
This is because of the high 28 percent tax on the face value of the lottery tickets sold through lottery distributors and the 12 percent tax on face value of lotteries tickets sold directly by state governments has made them too expensive for many people.
The lower demand for tickets has led to fewer lottery terminals and sales. The estimated loss in sales is reportedly at 70 percent. According to industry veterans, if the government does not reconsider the current GST then it could lead to loss of jobs and lower tax collections.
The original tax on these lottery tickets was set at 6.71 percent. With the current 28 percent tax, that is a 300 percent increase.
In a statement, Kamlesh Vijay, Group CEO of Sugal & Damani, said
To sort out the differences in the views among the state’s the GST Council had constituted an eight-member Group of Ministers earlier under the Chairmanship of Maharashtra Finance Minister Sudhir Mungantiwar to look into various issues relating to GST on lottery and in the last meeting and the council decided to seek legal opinion from Attorney General on the issue
One big issue according to Vijay is the difference between taxes. A 12 percent GST is charged on lotteries directly run by state governments. These tickets are not allowed to be sold outside the organising state. A 28 percent tax is placed on lottery tickets that are only authorised by state governments. These tickets can be sold outside the state running them. The result is a sort of tariff barrier for smaller state lotteries, which makes it difficult to get more people to buy them.
A Standard Rate
The lottery companies, led by Sugal & Damani, are demanding for a single GST rate and structure, no matter what type of ticket they are. They also ask that the tax rate be reduced and set at a more reasonable rate. The suggestion is that of five percent of the face value of the lottery ticket. The other suggestion is 28 percent of the MRP of the lottery ticket minus the prize payout.
Hopefully, this cry for help gets the attention of the government. Many lottery companies have been asking for a relaxation of the GST tax rate but they have not made any headway so far.