India gov't increases tax rate for lottery sector

According to a report published in The Economic Times, Indians who buy lottery tickets may have to shell out more to take a chance on fortune under the goods and services tax (GST). The government is looking to put lottery tickets in the 28% GST bracket, the highest slab, according to people with knowledge of the matter. That’s up from minimal or zero tax levied by about a dozen states that have lotteries. 

They are either run by these state governments, such as those of Sikkim, Punjab, Goa, Maharashtra and Kerala, or external parties licensed by them. According to industry estimates, lotteries are a Rs 50,000-crore business. 

“The taxation has to be logical,” said Rahul Tangri, president, Playwin, an electronic lottery provider. “It would be very unfair if the government levies tax on the ‘face value’ of the lottery.” 

The ‘face value’ of a lottery pot comprises three parts – the prize money, government taxes and operators’ margin. 

“GST should only be levied on the operators’ margin. The prize money part comes under direct tax (income tax paid by the winner),” said Tangri. 

The industry is critical of the move. “Any irrational tax structure would kill the industry,” said Kamlesh Vijay, CEO of Sugal & Damani, one of India's largest lottery and gaming operators. “Lottery is a well-regulated industry. It provides direct employment to over 10 lakh 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.