India’s ₹60,000 crore lottery industry is blaming GST for their loss of fortune

• The effective tax rate on the lottery industry is at 28%.
  
• Adding the taxes on prize money, the tax rate has tripled under the GST regime.
  
• Excessive taxes have given birth to illegal lotteries, allege lottery sellers.
  
• The government also collected only ₹3,725 crore of GST from lotteries and the potential is as high as ₹12,000 crore, according to the industry body.
  

Sugal and Damani who market government licenced lotteries have cut two-thirds of their points of sale in the last one year, to 10,000 from 30,000. And, it is not because Indians have stopped betting on their luck, but because lotteries have turned plain expensive after the levy of goods and services tax.


“Effective overall tax incidence of service tax and lottery tax was 6.71% on the face value in pre-GST whereas now it is nearly 28%,” said a press release by the lottery sellers. It is not just the tickets which are taxed, but the prize money is also heavily taxed and the industry laments that the tax incidence on it overall has increased a whopping 300%.


Added to that, the centre and state also tax them differently, making the licenced lottery tickets of some states less attractive.


“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,” said Kamlesh Vijay, group CEO of Sugal & Damani.


The industry is also affected by increased illegal lotteries which are eating into their market. The GST council too has taken cognizance of the issue has been which had earlier recommended that only 5% should be charged on the face value of lottery tickets. Another option was to charge 28% on the price, after excluding the prize payout.


“These has been of great concern and fears among the retailers’ employees and their families of job loss, but we are hopeful of a turnaround with support from the government,” said Vijay.


And, there is something in it for the government too promises the retailer. Only ₹3725 crore of GST was collected from the industry in the last nine months, while the industry believes that as much as ₹12,000 crore should have been collected considering the 20% face value of industry which has a massive size of ₹59,600 crore per annum.