Private lottery agents are seeking a level-playing field between lotteries sold within the organising state and those of other states authorised to be sold elsewhere, ahead of a crucial meeting of the Goods and Services Tax (GST) Council, arguing that the wide gap in their tax rates has affected the industry. The Council will discuss the recommendations of a ministerial panel led by Maharashtra finance minister Sudhir Mungantiwar on the issue during its meeting in Goa on Friday. Lotteries sold within the organising state attract 12% GST, while those of other states authorised to be sold elsewhere are taxed at the highest rate of 28%. “This huge difference in the tax rate on the same commodity acts as a tariff barrier for smaller states such as Goa, Sikkim and Arunachal when their tickets are sold in other bigger states, including West Bengal or Kerala,” said Kamlesh Vijay, Group CEO of Sugal & Damani, which operates government licensed lottery shops in many states. The Mungantiwar panel had told the GST Council that except the GST rate on the supply of lotteries, the eight-member panel had agreed on other issues related to the industry, including valuation of lottery tickets for taxation, regulation of online lottery and GST revenue on the item accruing to the consuming state.
The panel recommended that the GST Council would decide on 18% or 28% tax rate given that it was a sin good. The panel also said that banning online lottery had led to a spike in tax revenue of states such as Kerala and West Bengal, something that might interest other state governments. The forthcoming Council meeting is also expected to discuss the GST revenue trend of Union and state governments, enforcement actions needed to improve compliance and relief on filing annual returns for small businesses. GST revenue collection has been below target so far this fiscal year, putting pressure on the finances of the central government, which is obligated to compensate states for the shortfall in GST revenue. Some states are arguing that the Union government could borrow from the market to compensate states and that it could continue to levy cess on items such as car and tobacco for two-three years beyond 2022. At present, the Union government’s obligation to compensate states is till 2022.