GST on lottery tickets has crippled enterprise in India – right here is how
It is because, after the products and providers tax (GST) got here into impact in July 2017, the lottery enterprise has run into disaster for 2 causes—one, twin taxes as lottery is taxed underneath two tax brackets, i.e. 12 p.c and 28 p.c, and subject of taxable worth on lottery.
The difficulty of taxes
The levy of GST is on the face worth of lottery tickets, together with the prize cash awarded to winners. And, this has crippled the lottery trade by the rampant enhance in unlawful lottery. Moreover, it has additionally affected the tax assortment of the federal government.
So, earlier than GST was levied on lottery tickets, round 90 p.c would go for the worth fee for a Rs 100 ticket. However, after the imposition of GST, solely 60 p.c of the prize cash is paid to the winner.
The face worth of a lottery ticket is all the time inclusive of tax.
Earlier than GST got here into impact, the general tax incidence of service tax and lottery tax was 6.71 p.c on the face worth. However, now, it’s almost 28 p.c on the face worth, together with the prize cash, which is a 300 p.c enhance within the tax.
As well as, it’s estimated that the GST assortment from lottery must be not less than Rs 12,000 crore at a mean GST fee of 20 p.c on the face worth. However, solely Rs 3,725 crore has been collected in 9 months in FY 2018-19, in accordance with the reply to a question within the Rajya Sabha.
This reveals that the GST assortment by authorities is lower than 50 p.c of the potential at current.
The lottery trade has been hit onerous attributable to GST
Kamlesh Vijay, the Group CEO of Sugal & Damani – one of many largest entrepreneurs of state authorities issued lotteries in India, mentioned that the estimate of the lottery market in India earlier than GST was round Rs 60,000 crore, however the present estimate is Rs 10,000-12,000 crore.
He additionally defined how twin taxes had been impacting the lottery house.
“At the moment, 12 p.c GST is being charged on lotteries run by state governments (a lottery not allowed to be offered in any state aside from the organizing state) immediately, whereas a 28 p.c tax fee is being levied on the lottery tickets licensed by state governments (a lottery which is permitted to be offered in state(s) aside from the organizing state additionally). This large distinction within the tax fee on the identical commodity acts as a tariff barrier for smaller states like Goa, Sikkim, Arunachal and so forth when their tickets are offered in different greater states like West Bengal or Kerala.”
Members from the lottery trade, like Sugal and Damani group, have been urging the GST Council to look into the tax points. Nevertheless, no resolution is in sight even after the 35th GST council assembly attributable to lack of consensus.
A legislation committee assembly, to be held on September 6, can be discussing the GST on lotteries, and the discussions can be fed into the GST Council assembly which is to happen later this month.
However, why are the considerations of the lottery trade vital?
The enterprise which generates employment alternatives has now reached a state of affairs the place lottery sellers have shut outlets.
“Massive variety of lottery sellers have shut store in Punjab and Maharashtra particularly. It (GST) has a lesser affect in West Bengal and Kerala,” mentioned Vijay.
He added that the demand (for lottery tickets) had come down and folks had shifted to different unlawful means. It has affected the livelihood of many individuals, he added.
Lottery cash may be helpful for sports activities and public welfare
However, there’s extra to it because the income generated from the lottery enterprise can profit the financial system in some ways.
“Lottery can generate income for a number of issues like UK. All their sports activities group are being funded by lottery income. China is doing two kinds of lotteries — one is for individuals welfare lottery and different is sports activities lottery. For individuals welfare, they’re producing internet income of round USD 8-9 billion every year. For sports activities they’re producing USD 5-6 billion every year. So, whole lottery income they’re producing round USD 16-17 billion. Singapore is producing USD four billion internet income,” identified Vijay.
Therefore, he thinks that in India, too, the lottery cash can be utilized for funding medical providers and for growth of sports activities.
Ask Vijay about their plans forward for Sugal & Damani, the group that has an annual turnover exceeding Rs 1,000 crore at this time and 75 p.c market share within the on-line lottery enterprise, and he says that because of the “uncertainty by way of GST we aren’t in a position to plan. We don’t know whether or not there can be single tax. So, we can not plan for the long run.”
Sugal & Damani had in extra of 30,000 level of sale (POS) however now has been diminished to lower than 10,000 POS and it has been spiraling down ever for the reason that 17th GST council meet.Get entry to India’s quickest rising monetary subscriptions service Moneycontrol Professional for as little as Rs 599 for first 12 months. Use the code “GETPRO”. Moneycontrol Professional provides you all the knowledge you want for wealth creation together with actionable funding concepts, unbiased analysis and insights & evaluation For extra data, take a look at the Moneycontrol web site or cell app.