What the 37th GST council means for online lotteries in India
At the 37 GST council that is taking place in Goa, the single tax rate for lottery tickets is being discussed. While tax on lottery tickets has been a state matter until now, the government is calling for a nation-wide rate.
The lottery industry is questioning the amount of taxable value for calculating GST on lottery winnings. They are urging the government not to impose tax on the value of a ticket, which would affect consumers.
Kamlesh Vijay, CEO of Sugal&DamaniGroup, believes the should place taxes on the face value of the ticket, minus the prize payout. This means lottery companies would take the weight of the taxes, instead of the consumer. This is what is done in many other international lotteries.
The central government is also considering a possible ban of online lotteries. This would inevitably lead to more printed lottery tickets. Vijay believes this would also increase the number of illegal or fake lottery tickets being sold. After all, online lottery is controlled by state governments. Further more, many retailers us the system of selling online lottery tickets through a central server controlled by the state government. This leads to better transparency. Vijay added that a Supreme Court order allows states to control or ban any type of lottery, including online lottery.
Online lottery has many benefits for governments, including knowing how many tickets are sold on a real time basis, access to data, and making sure the games are fair. According to Vijay, Ministry of Home Affairs even recommended that lottery should be online only.
However,Maharashtra Finance Minister SudhirMungantiwar, leader of the ministerial panel, claims that banning online lotteries increased tax revenues in Kerala and West Bengal.
Vijay countered this with the statement that Kerala and West Bengal only allow paper lotteries in the first place. These tickets are often smuggled to other states, such as Andhra Pradesh, Bihar, Karnataka, Tamil Nadu, andJharkhand. He claims that online lottery would prevent the smuggling of tickets, since geo-blocking can ensure the tickets cannot be sold in states where the lottery is not legal.
Lotteries are sometimes considered a sin product in India. This is in stark contrast to many other countries around the globe, which have offered state-run and private lotteries since before the twentieth century. Indian lotteries have had a poor reputation because India was very late in regulating its lotteries. Even though lotteries have been popular in India since 1969, they were only regulated by the Lottery Regulation Act in 1998.
Vijay is confident that Indian state governments will continue to earn money from lotteries. This will improve the perception of lottery greatly in India, especially with the success of lotteries in countries like the USA, Australia, the UK and Singapore, where the profits are used for the development of sports, charities and other beneficial projects. The UK’s Olympic team is funded by lottery money, and the team is the second best ranked in the world. China is spending 7 Billion dollars on their team annually, the bulk of which comes from lotteries. Australia is following suit.
None of this is takes into account the various online lotteries found on offshore operators. Indian players are prohibited from gambling in most states. However, the law makes no stipulations on online lotteries, casino games or sports bets found on sites based outside of India. This loophole is causing thousands of Indian players to simply take their bets elsewhere. If online lotteries disappear, chances are many more will do the same.