The government of India is looking to place lottery tickets in the highest GST bracket of 28 percent, according to industry insiders.
According to a report from The Economic Times, the new tax is a staggering increase from the minimal, or zero tax that is levied by around a dozen states with lotteries.
Lottery operators have been up in arms over the proposed levy.
“The taxation has to be logical,” said Rahul Tangri, president, Playwin, a provider of electronic lottery. “It would be very unfair if the government levies tax on the ‘face value’ of the lottery.”
“GST should only be levied on the operator’s’ margin. The prize money part comes under direct tax (income tax paid by the winner),” said Tangri.
“Any irrational tax structure would kill the industry,” said Kamlesh Vijay, CEO of Sugal & Damani. “Lottery is a well-regulated industry. It provides direct employment to over 10 lakh (one million) people. Higher tax slabs would force lottery companies out of business. It will also spawn a large number of underground, illegal lottery schemes,” he said.
The new lottery tax is likely to impact the revenue of state governments such as Sikkim, Punjab, Goa, Maharashtra and Kerala.
However surprisingly, some officials from states that are reliant on lottery revenue were in support of the new tax scheme.
“Lotteries which are managed by external parties do not conform to any rules laid down in the Central Lotteries Act. These are mostly what you call the lottery mafia,” said Kerala finance minister Thomas Isaac to the Economic Times.. “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.”