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The Indian lottery industry has had a tough year in terms of taxation. In September 2018, Punjab-based branches of four Indian lottery distributors – Essel Group, Sugal & Damani Group, Martin Group and M/s PAN India Network Ltd were charged with GST evasion. The following month, a single judge bench of the Calcutta High Court, comprising of Justice Debangsu Basak rejected a writ petition asking for exemption for lottery operators from paying GST on grounds that lottery tickets were an actionable claim and thus outside the definition of ‘goods’.
Existing in a climate that is predominantly adverse for lotteries, the industry may have come across a sliver of hope. The GST Council has decided to consider lowering the GST rate on lotteries when the constitutional body convenes for its next meet which will take place on January 10, 2019.
In its previous meeting, on December 22, 2018, the council had rationalised the 28% tax slab and reduced rates on 23 goods and services. The meeting of January 10 will be the 32nd meeting of the council and will be chaired by Finance Minister Arun Jaitley and his state counterparts.
Talking about the upcoming meeting, Jaitley had said that the next meeting would consider rationalisation of tax rates on residential properties and raising the threshold limit for MSMEs from the current ₹20 Lakhs.
At present, state run lotteries are charged a 12% tax on the face value of lottery tickets, while lotteries operated through private distributors are subject to a 28% levy. A final view would be taken on this issue as to whether the current tax rate should persist or if there is a possibility for change.
However, the lottery industry is not alone in its battle against the tax department. The poker industry has also suffered under the weight of heavy taxes that has often stood as an obstacle in its path of progress. Poker operators are compelled to deduct a 30.9% tax deduction at source or TDS on any winning of over ₹10,000 as per Section 194B of the Income Tax Act.
In 2016, a committee headed by the Justice RV Easwar was formed by the government to review the current income tax provisions and offer suggestions of reforming them. The committee recommended increasing the threshold limit on TDS deductions on winnings from gambling, horse racing, lottery games, card games, crossword puzzle etc. from the previous ₹10,000 to ₹15,000. The committee had stated that increasing the TDS threshold limit would be a step towards helping the industry develop further, “Considering the importance of the long overdue revision of these puny limits, the Committee has recommended suitable hikes in such threshold limits.”
Despite the investments coming into the poker industry, trudging under the burden of these exorbitant taxes has certainly acted as a deterrent in its evolution. Nonetheless, with the 32nd GST council meeting in the offing, 2019 may turn out to be year of tax reformations.
Image Courtesy: Asia Gaming Brief