India to implement controversial tax

India to tax lottery tickets.

Credits: Flickr/David Baxendale.

The government is expected to place a 28 percent tax on lottery tickets in India and has raised unrest among local operators.

India.- Indian government will put lottery tickets among the highest category of their soon to be implemented goods and services tax (GST). This would put up a 28 percent levy on lottery tickets, which would mean an increase from as low as zero or minimal taxation around India. Lotteries in India are run by either state governments or licensees and they are a business of nearly US$7.77 billion.

The announcement has grown unrest among lottery businessmen and some may even close their enterprises if the levy set is too high: Rahul Tangri, electronic provider Playwin’s president said: “The taxation has to be logical. It would be very unfair if the government levies tax on the ‘face value’ of the lottery.”

The face value includes the prize money, government taxes and operators’ margin and, according to Tangri, the Indian government might be aiming to tax on it. “GST should only be levied on the operators’ margin. The prize money part comes under direct tax (income tax paid by the winner)”, he added.

Kamlesh Vijay, CEO of Sugal & Damani (one of the country’s largest lottery operators) warned that “any irrational tax structure would kill the industry”. Vijay added that “lottery is a well-regulated industry” and said: “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”.

Despite private operators’ unrest, there has been some approval among states that depend on lottery revenue: Kerala finance minister Thomas Isaac told media outlet The Economic Times that “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”. He explained that “a higher tax regime would drive these people out of business” and said: “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”.

Indian courts have ruled in the past that lotteries aren’t goods nor services, therefore, operators’ point of view is that GST should not be applied to them. However, according to KPMG India national head Sachin Menon, “lottery is an actionable claim and is specifically categorised under the definition of goods”. He explained that it can be grouped with betting and gambling and, thus, “it is possible that the government may levy 28 percent GST on it”.