The current Goods and Services Tax (GST) structure of 28% tax on face value of lottery tickets sold through lottery distributors and 12% tax on face value of lotteries sold directly by state governments has crippled the lottery industry, according to leading lottery distributor conglomerate, Sugal and Damani Group.
Industry veterans believe that the GST Council’s decision has led to reduction of lottery terminals and sales by almost 70%, and in case the governments fails to reconsider its decision, it would result in loss of thousands of jobs and diminishing turnover, resulting in even lesser tax collections.
They point out that effective overall tax incidence of service tax and lottery tax was 6.71% on the face value in the pre-GST era whereas now it is nearly 28% on the face value including prize money that is a whopping 300% increase in the tax incidence.
According to Kamlesh Vijay Group CEO of Sugal & Damani, “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 of the main impending issues is the differential tax treatment of lotteries between State government run and State government authorized lottery. Currently 12% GST is being charged on lotteries run by State Governments (a lottery not allowed to be sold in any State other than the organizing State) directly, while a 28% tax rate is being levied on the lottery tickets authorized by state governments (a lottery which is authorized to be sold in State(s) other than the organizing State also). This huge difference in the tax rate on the same commodity acts as a tariff barrier for smaller states like Goa, Sikkim, Arunachal Pradesh 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. ”
Sugal & Damani and other lottery companies are consequently demanding that a single GST rate and structure be levied for state-run lotteries sold through distributors or directly through the state government machinery.
They suggest that the tax rate should either be 5% of the face value of the lottery ticket or 28% of the margin retained by the lottery distributors/state government, i.e. MRP of the lottery ticket minus prize payout.
Private lottery companies have consistently protested and demanded a relaxation in the taxation structure for the industry, without finding much favour with the GST Council, due to strident opposition from the Kerala government.