India lottery operators call for GST reform

India’s lottery operators are seeking urgent GST reforms, which they say have been “crippling” the industry with multiple issues.

Mr. Kamlesh Vijay Group CEO of Sugal & Damani said one of the impending issues is the differential tax treatment of lotteries between state-government run, and state government authorized lottery.

Under the current rules, there is a 12 percent GST is being charged on lotteries run by State Governments directly, while a 28 percent tax rate is being levied on the lottery tickets authorized by state governments.

“This huge difference in the tax rate on the same commodity acts as a tariff barrier for smaller states like Goa, Sikkim, Arunachal etc. when their tickets are sold in other bigger States like West Bengal or Kerala. A counterproductive move was recently done by Kerala legislative assembly by passing a unanimous resolution urging the Central Government to withdraw the move to bring uniform GST rate on lottery,” said Vijay. 

However, Vijay said a bigger problem has been how the GST Council has interpreted “taxable value on the lottery.”

Vijay said the GST levy placed on the face value of lottery tickets has caused a rampant increase in illegal lottery, and has also impacted tax collection from the government.

“Effective overall tax incidence of service tax and lottery tax was 6.71 percent on the face value in pre-GST whereas now it is nearly 28 percent on the face value including prize money that is a whopping 300 percent increase in the tax incidence.”

The solution, Vijay said, should be a change in GST rates, including a GST rate of 5 percent on face value (MRP) of lottery tickets sold; and a GST rate of 28 percent on MRP of lottery tickets sold less prize payout

“Should the GST council had considered one of the options from its own committee there would not have been a point of contention from the industry to date,” he said.