Business Gaming

Sugal & Damani launches Luckykhel mobile app for buying lottery tickets

Lottery conglomerate Sugal & Damani Group will be launching a new mobile app called ‘Luckykhel’ over the next few days, as per a report in the Economic Times.

The lottery distribution company claims that it would be able to reach more participants through this initiative and at the same time reduce the costs of reaching the customers and provide round the clock option to the players to buy lottery tickets, the price of which ranges from Rs. 2 to Rs. 25.

The Luckykhel app will be launched first on android mobile phones and subsequently be offered on other platforms. The company CEO Kamlesh Vijay in his conversation with Economic Times states that lottery tickets of Goa, Sikkim and Arunachal Pradesh will be marketed through this mobile app at first and efforts are in progress to add state lotteries of Maharashtra and Punjab on this platform.

Vijay added that lotteries like lottos, powerball, lucky-4s, magic lottos etc. will be sold through the digital application and persons above the age of 18 years in Maharashtra, Punjab, West Bengal, Goa, Arunachal Pradesh, Mizoram, Sikkim, Goa and Nagaland, where lotteries are permitted would be allowed to play on the app.

He further noted that users can participate by completing a KYC (Know Your Customer) process and linking their bank accounts or e-wallets with the mobile application. Residents of other states, apart from these eight states will be barred from accessing the app through geo-blocking.

The market share of mobile lotteries is expected to be 5-10% of overall lottery sales in the next one year and 40-45% of the total sales in five years time. The current distribution channels through physical outlets will not be affected due to this initiative, he said.

Lottery distributors have been crippled with a 28% GST on the face value of tickets since the introduction of the unified indirect tax regime and have been trying innovative ways to retain their revenues, after their repeated pleas to lower the tax have fallen on deaf ears.

The introduction of mobile lotteries aims to broaden the customer base in a bid to increase sales. However, the Lotteries (Regulation) Act, 1998 and Lotteries (Regulation) Rules, 2010 specify certain stringent conditions under which lottery draws have to be conducted, which include, limit on the number of draws, restriction on the place of the draws, the paper and stationery to be used for lottery tickets, credit of the entire proceeds from lottery ticket sales to the public ledger account or consolidated fund of the organising state etc.

It is unclear whether the new mobile app is conforming to these statutory and legal requirements and whether there will be physical copies of the lottery tickets (either through a computer terminal or paper tickets) delivered to the players, as mandated by law.

Business Gaming

Kerala government asks centre to ban Mizoram lotteries, arrests lottery agents

The Kerala government has written to the Union Home Ministry seeking a ban on lotteries conducted by the Mizoram government. The letter states that the Mizoram Lotteries Director has entered into an agreement with Teesta Distributors in violation of the Lotteries Regulation Act and Rules as per The New Indian Express.

State Finance Minister Thomas Isaac also stated that the Minimum Guaranteed Revenue model adopted by the Mizoram government to award tenders to private distributors is unambiguously illegal and a violation of the Lotteries (Regulation) Rules, which require the entire proceeds of lottery ticket sales to be deposited in the state exchequer. Isaac cited the recent Comptroller and Auditor General of India (CAG) performance audit of Mizoram State lotteries to claim that Mizoram lotteries were run in an illegal manner.

Isaac also claimed that the Kerala government had received an incomplete letter from the Mizoram lotteries claiming that Teesta Distributors would be marketing its lotteries in the state.

“As per the Lotteries (Regulation) Rules, the organising state should provide details about all the arrangements they have made for the conduct of lotteries in the host state” Isaac said as per Deccan Chronicle. “This letter, sent to the Chief Secretary, just mentions the name of the distributor and nothing more,” he added.

Isaac also added that the state GST Act imposes several conditions before lottery tickets can be brought into Kerala and claimed that Teesta Distributors had flouted those provisions.

The Kerala police on Sunday seized Mizoram lottery tickets worth Rs. 5 crore rupees and arrested four persons associated with Teesta Distributors. It is alleged that Teesta Distributors is connected to lottery king Santiago Martin. CBI, ED and other investigative agencies are probing numerous allegations of manipulation and cheating in conduct of lottery draws, tax evasion and money-laundering leveled against Martin.

Read more about Kerala State Lotteries.

Legal & Regulatory

Kerala FM dubs Mizoram lotteries illegal

Kerala Finance Minister Thomas Isaac claimed yesterday that selling Mizoram lotteries in the state was illegal and without the government’s authorisation.

Isaac added that the government would investigate as to who was advertising the sale of Mizoram lotteries in the state and indicated that lottery king Santiago Martin seemed to be behind the move.

The government has also issued notification imposing restrictions on the sale of lottery tickets of other states, he noted.

He also added that after the imposition of the Goods & Services Tax (GST), efforts were on from various states to sell lotteries in Kerala.

Isaac was instrumental in prevailing upon the GST Council to impose a higher GST rate on sale of lottery tickets authorised by the state government but sold by private distributors. According to him, having a 28% rate on lotteries sold by other states through private distributors would curtail fraud and malpractices associated with the business.

The Kerala government has been vociferous in the sale of other state lotteries within its territory and has claimed that sale of such lotteries violated many rules. Recently the Comptroller and Auditor General of India (CAG) also found several irregularities in the conduct of Mizoram state lotteries.

The CAG report claimed that proceed from sale of lottery tickets worth Rs. 11,808 crores was not deposited in the state exchequer from the period 2010-15. The report also pointed out many other irregularities in the issuance of tenders to private operators to conduct the lottery draws and the flaws in the revenue share model adopted by the state government.

Read more about Kerala State Lotteries.

Legal & Regulatory

GST Council decides dual rate structure for lotteries: 12% for state-run lotteries, 28% for state authorised private lotteries

Union Finance Minister Arun Jaitley  announced a dual GST rate for lottery tickets in a press conference after the GST Council meeting today.  Jaitley noted that GST on lottery tickets was one of the most contentious and hotly debated topics in the GST council and several hours were spent discussing the issue.

While the government of Kerala which conducts its own lotteries, without involving private lottery distribution companies, wanted the highest GST rate of 28% on lotteries (to deter private operators from selling lotteries within Kerala), some other states wanted a lower GST rate.

Finally, the GST council decided that there would be a dual rate of charging lotteries, wherein lotteries operated by state governments without the help of private distributors or marketing agents would be charged a 12% GST rate, while lotteries operated by private distributors would be charged the highest tax rate of 28%.

At present only the state of Kerala operates its own lottery schemes without involving any private companies. Other states like Maharashtra, Goa, Sikkim, Mizoram, Nagaland, Punjab, West Bengal etc. have authorised private distributors to sell and market their lottery schemes.

Jaitley also announced that GST would be charged on the face value, i.e. the price of lottery tickets and not on the margin retained by the government or distributors.

Previously, the central government has sought to levy service tax only on the margin retained by private lottery companies. Lottery companies have noted that the higher rate of 28% and that too on the face value of the tickets would spell doom for the business.

It seems that the GST Council has taken a conscious decision to impose a high rate of tax on private lottery companies to make the business unsustainable. Private lottery operators have often been accused by law enforcement agencies of committing fraud and evading taxes.

Business Gaming

Government likely to set 28% GST rate for lottery tickets

It seems that the central government has made up its mind to put lotteries in the highest GST slab of 28 per cent, as per a recent report in the Economic Times.

The report quotes sources as saying that both lotteries and gambling would be kept in the highest tax bracket. The model law for GST passed by the Parliament places actionable claim (Supreme Court judgments have stated that lottery tickets are actionable claims) in the category of ‘goods’ and not ‘services’, making it likely that the highest rate of tax will apply to lottery tickets.

Earlier, Revenue Secretary Hasmukh Adhia had indicated that gambling and betting would be taxed at a rate higher than 18 per cent.

GST rate of either 12 per cent or 18 per cent would be applicable on services, while some categories of demerit goods are likely to face a GST rate of 28 per cent or more. It is also understood that the central government is likely to charge GST on the ‘face value’ of lottery tickets and not on the operators margin, as per the report.

The fitment of goods and services into different categories of rates is likely to be finalised in the GST Council meeting in Srinagar on 18-19th May.

Most private lottery operators however have opposed the move to include lotteries in the highest GST rate and the proposal to charge GST on the face value of lottery tickets.

However, Kerala Finance Minister Thomas Issac has supported the move to levy a higher GST rate, saying that private lottery operators do not conform to the Lotteries (Regulation) Act, 1998 and Rules framed thereunder.

“A higher tax regime would drive these people out of business. I am prepared to lose some revenue because of higher GST slab on lotteries. It will eliminate a big law-and-order problem around lotteries in our country” he added.

Incidentally, the Comptroller and Auditor General of India (CAG) in its recent performance audit of lotteries operated by the Mizoram government and report on the Nagaland government finances has severely indicted private companies for defrauding customers and the state governments.

The CAG reports indicate that some private companies have collectively not deposited dues worth over Rs. 26,000 crores to the Mizoram and Nagaland governments.

The scathing reports, unsparing in their criticism of lotteries operated by these companies, further point out the possibility of rigging or manipulation of the winning numbers by private companies, flagrant violations of the Lotteries (Regulation) Act and Rules, vulnerability of computer systems of the private operators conducting lotteries and rampant tax evasion.

It is possible that the central government has taken cognisance of these CAG reports and decided to impose a higher GST rate on lottery tickets, to discourage the appointment of private companies as lottery agents and distributors.

Legal & Regulatory

New government data says 1.25 lakh cases under Gambling Act in 2014

Figures released by the Union Ministry of Home Affairs indicate that a total of 125494 cases under Gambling Acts of various states were registered in the year 2014 across India.

The top 10 states in terms of the number of cases registered under Gambling Act were: Madhya Pradesh, Maharashtra, Rajasthan, Andhra Pradesh, Karnataka, Gujarat, Chhattisgarh, Uttar Pradesh, Tamil Nadu and Kerala during the year 2014. The largest number of cases registered under Gambling Act (22050) were in Madhya Pradesh, which accounted for 17.57% of the total cases registered while Maharashtra came second with a total of 16637 cases being registered.

These top 5 states accounted for 62.26% of the number of cases registered under Gambling Act in India, while the total 10 states accounted for 91.76% of the total number of cases registered as per the 2014 government data.

Notably, states like Sikkim, Mizoram and Lakshadweep were ‘gambling mukt‘ and did not register any cases under the applicable gaming legislation. The data released by the Home Ministry however does not indicate the conviction rate in gambling cases, which is believed to be abysmally low.

Understandably, large number of cases were registered in populous states like Madhya Pradesh, Maharashtra, Uttar Pradesh and Rajasthan. Interestingly however, no gambling case was registered in Sikkim where casinos, online gaming and state-run lotteries are legal. No instance of any illegal gambling activity in Mizoram can probably be attributed to the fact that state-run lotteries provide citizens an avenue to legally try their luck.

Note: The full data and interactive map, compiled by the government of India can be accessed here.