The All India Federation of Lottery Trade & Allied Industries (AIFLTAI), an umbrella organization of lottery distributors, stockists, agents, etc., has written to the GST Group of Ministers constituted to look into the GST issues in the gaming sector. The federation requested a uniform GST rate and method of valuation of services across all states of the country just like Income Tax and several other products in GST as well for lottery and gaming.
Lotteries are legal only in a handful of states, apart from Kerala, where the state government does not permit private distributors, West Bengal is the biggest market for the paper lottery business. Santiago Martin, the businessman known as the lottery king is believed to be funding TMC’s national expansion ambitions. As a major operator, Martin has significant influence over the federation.
Currently, there is a disparity in the valuation of services with lotteries charged at 28% on face value while 18% GST is levied on games of skill only on the portion of the face value excluding prize money. The letter states that this disparity leads to mushrooming of illegal lottery businesses in the country which will impact negatively on GST revenue generation from unregulated lottery businesses.
At present, GST is levied at 28% on the face value of bets. “If a uniform law regarding tax/valuation of services could be brought in to govern online skill gaming, the Government could get a windfall through the GST Revenue and also through TDS on the winnings paid out,” the letter read.
The letter also stated that no regulation is applicable to online gaming and even international websites are running in our country. “Proper legislation to regulate Online Gaming shall be in place and international websites and illegal activities should be banned too in the national interest,” the letter states.
The federation contends that the deviation in GST rates and valuation of services in Casinos, Race Courses, and Online gaming has already led to a great disadvantage to the lottery business in the country and has resulted in shifting of customer base to unregulated illegal betting and gaming business.
Citing an example, the letter states that the lottery distributor Future Gaming and Hotel Services Pvt. Ltd., owned by Martin paid a substantial sum of more than Rs. 11,037.94 Crores (Rs.10,839 Crores in the State of West Bengal alone) for the period of 42 months from July 2017 to February 2021 in the form of GST.
This is not the first time the federation has written to government authorities concerning the GST issues. The federation in 2019 had reportedly suggested that the GST Council could consider imposing GST on lotteries after abating the prize money component of the ticket as the said amount never forms part of the income in the lottery trade. What is interesting is, this time the federation sought regulation of online gaming which is currently not specifically regulated or prohibited by most states.
Separately, the federation has written to Union Home Minister Amit Shah complaining about the illegal international lottery sites. The letter alleged that international lottery is conducted by online platforms without any control, license, or regulation by the government. ALFTAI contended that malpractices are present in international lotteries and draws are designed as per the convenience of the organizer. “The lotteries organised by a government of a State in India are facing heavy revenue loss including GST and other taxes due to internal lotteries which are illegally conducted without any control and regulations,” the letter read.
The letter also complained about mushrooming online gambling websites. The Federation said that the FDI Policy prohibits foreign investment in lottery, betting and gambling. “Under FEMA, the Foreign Exchange Management (Current Account Transaction) Rules, 2000 were framed to impose reasonable restrictions for current account transactions. The Current Account Rules provide those transactions provided in Schedule – I are prohibited. Remittances from lottery winnings including the purchase of lottery tickets etc. are included within Schedule – I which essentially means all foreign exchange gaming transactions are prohibited.”
Interestingly, the letter to the Home Minister says gaming transactions are prohibited under FEMA. The letter names lottery websites like TheLotter, LottoAgent, WinTrillions, LottoKings, LottoLand.