GST on lottery has Thomas Isaac confused

Thiruvananthapuram: Goods and Services Tax on lotteries has put finance and lotteries minister Dr Thomas Isaac in a serious predicament. Under the VAT regime, lotteries were charged just a 1.5 percent service tax by the Centre. From July 1, state-run lotteries will be charged a GST of 12 percent.

This has suddenly threatened a delicate revenue structure of state lotteries. The state will either have to sacrifice revenues or ask ticket buyers to pay more. Dr Isaac is confused about the path to take.

From just about Rs 500 crore in 2011-12, the non-tax revenue from lotteries had burgeoned to Rs 7500 crore in 2016-17. The state, however, pockets just 15 percent of this revenue. The largest chunk, 48 percent, goes as prize money. The other major outgo, 28.5 percent, is in the form of agents’ commission. Establishment and printing costs take up seven percent, and then there is the 1.5 percent service tax. All of this together gobble up 85 percent of the revenue from lottery sales.

Once GST comes into force, the 1.5 percent service tax goes but only to be replaced by a 12 percent GST. The question is: how is the finance minister going to account for the additional tax outgo of 10.5 percent. Will he sacrifice a part of revenue from lotteries, his biggest non-tax revenue earner? Or will he increase the prize of lotteries making it less attractive? Or will he reduce the commission of agents, risking revolt by one lakh plus direct and indirect agents? The Lotteries Department is clueless about the point from which the tax will be collected.

Under the existing system, the Lotteries Department sells the printed lotteries wholesale to the State Lotteries Welfare Board. The service tax is also secured from the Board, which recoups it from agents. The finance minister had publicly taken the stand that a high GST would drive out the lottery mafia that were operating outside the state’s rules. But Isaac had consistently been reluctant to part with state’s revenues, his decision not to forego the state’s share of sales tax when fuel prices were raised is testimony.

The chances are, fortune seekers will be asked to pay more for a ticket. An ordinary ‘fortune strip’ that now sells for Rs 30 will cost Rs 33.6, and special tickets like Karunya that now sells for Rs 100 will cost Rs 112.