Indian Lottery Operators Get Hit With 28% Tax While Online Rummy Gets Banned In Telangana

The Goods and Service Tax (GST), which will be rolled out on July 1, will have an impact on the gambling and entertainment industry in India. Dual tax rates have been announced for the lottery industry, which has enjoyed zero tax so far. While state operated lotteries that have no marketing agents and private distributors have to pay a GST rate of 12%, private lotteries will have to pay 28% taxes under the new regime.
Finance Minister Arun Jaitley has confirmed that GST will be charged on face value, not on margins retained by distributors.
Hotly Debated Issue
India’s lottery business is worth US$7.78 billion and the GST charged on it was debated hotly in the council. Kerala, which is home to several state-run lotteries, wanted a high GST rate to maintain its monopoly while other states demanded lower rate of GST.
The high tax rates will now make it difficult for private operators to survive. Many of these private operators stand accused of evading taxes and cheating players. Private lottery operators are allowed in states such as West Bengal, Nagaland, Goa, Maharashtra, Mizoram, Sikkim, and Punjab.
In addition to private lotteries, race club betting and gambling have also been placed in the tax bracket of 28% along with luxury entertainment services such as five-star hotels and cinemas.
In the meantime, non-gambling games such as games of skill come in the category titled “all other services not specified elsewhere” and will be charged 18% GST. Though lower than the tax rate for gambling activities, it is higher than the 15% taxes that poker, fantasy sports, and online rummy operators currently pay in India.
Kerala’s Argument
At the GST Council meeting held at New Delhi on Sunday, T. M. Thomas Isaac, the finance minister of Kerala, criticized attempts to decrease tax rates on lotteries. When the north-eastern states demanded lower lottery taxes, Isaac threatened that he would boycott the meeting. His demand that the tax rate for private lotteries should be the same as gambling and horse racing received support from the government of Jammu & Kashmir.
North-eastern lotteries will find it difficult to survive with a tax rate of 28% as a majority of them are sold through agents in other Indian states. Isaac has also stated that agents selling lottery tickets from other Indian states will not be permitted to sell Kerala state lottery tickets.
Finance Minister Confirms GST Rollout
In spite of certain pending issues, the GST Council has agreed to roll out the GST on July 1. The finance minister of India says that the country lacks the “luxury of time” to further delay the implementation of GST. The new tax regime will be rolled out officially on June 30 midnight and will replace all existing state and central levies on products and services.
Jaitley told reporters: “A number of companies and trades have been raising the issue of the lack of their own preparedness. We do not have the luxury of time to defer implementation of GST.” More than 80% registered businesses have obtained provisional GST registration.
The GST council has also decided to revise taxes on hotel rooms. Accordingly, hotels that charge Rs. 2000 – Rs. 7,500 per day will have to pay 18% tax while rooms charged more than Rs. 7,500 will be taxed 28%. Restaurants in five-star hotels will be charged a GST of 18%, said the finance minister.
All Indian states and territories except Jammu & Kashmir, Punjab, and Tamil Nadu have completed the required legislative formalities for the implementation of the GST on July 1.
Online Rummy Banned in Telangana
Telangana has amended its gambling laws to ban online gambling. Just three months back, the state had created an investor friendly gambling policy with incentives for businesses interested in launching online gambling services. But now the government has decided to ban all forms of Internet gambling when it heard a number of complaints of players getting addicted to online gambling.
According to the amended laws, criminal penalties will be imposed on those who do sports betting online or play rummy, matka, and poker on the Internet. The cyber police would track online gambling activities and take action against those who violate the state’s gambling laws.