“Lottery is not gambling… It’s just trying one’s luck. And even if it is gambling, it’s fine as long as it is done for the benefit of the king or the state,” says Thomas Isaac, finance minister, Kerala, quoting an Indian philosopher. Isaac may sound a bit conceited but he can afford to. The Kerala government launched lotteries worth over Rs 4,000 crore in the previous fiscal, the proceeds of which went towards providing healthcare benefits to several lakh low-income families.
As per data sourced from the All India Federation of Lottery Trade (AIFLTAI), Kerala collected GST worth Rs 908 crore and state revenue of Rs 1,691 crore. In fact, it leads the tally among the nine ‘lottery-friendly’ states, which together generated close to Rs 6,000 crore vending lotteries last year. (See table) “We’re getting to know these numbers because of GST. Lottery traders are now required to report their business volumes,” says Jay Sayta, founder, GLaws.in and an expert in lottery and and gaming laws of India. “These traders were not reporting — or under-reporting — their trade volumes prior to GST.
Business would have been as high, or much higher, in previous years too.” But AIFLTAI members beg to differ. According to them, 2017-18 was the peak. “In terms of government revenue, last year may go down in history as one of the best years for the lottery business,” affirms Kamlesh Vijay, group chief executive, Sugal & Damani, one of the largest lottery marketers. “Due to GST levy, lottery schemes have been redesigned a bit. Earlier, state governments paid close to 90% as prize money; now they’re paying a maximum of 80–82% to make spread for the tax incidence,” Vijay explains.
The nine lottery states have collected close to Rs 3,950 crore as GST. As per the current GST structure, interstate sale of lotteries attracts 28% tax while intrastate sales come under the 12% bracket. Lottery operators are required to pay GST on face value of the lottery, which also includes the prize money.
“Higher government revenues are because of higher taxes… Earlier, we paid 2-3% as VAT and a fixed sum of money (per draw) as lottery tax. Now, we’re forced to pay 28% straight, if we market lotteries (of an issuing state) in a different state,” says a large lottery marketer on conditions of anonymity. “This is bad for business as there’s not much left on the table for the distributor.
Also, small states like Goa, where there are not many lottery buyers, suffer because their issuances are sold mostly in Maharashtra and other states. Such interstate sales come under the 28% GST bracket,” explains the marketer quoted above.
FOR A GOOD CAUSE
Lottery is currently legal only in Kerala, Maharashtra, West Bengal, Punjab, Mizoram, Arunachal Pradesh, Sikkim, Assam and Goa. The Lottery Regulation Act does not allow private parties to run schemes. Only state governments can issue lotteries to augment revenues. Corporate entities such as Sugal & Damani and Playwin market these issuances to the people.
“Lottery is a good way to augment governmental revenues. The money that comes in can be used to run various social welfare programmes,” says Vijay. According to industry estimates, lotteries are a Rs 50,000-crore business in India. While online lotteries are quite popular in several states, paper lotteries may pip online lottos (in terms of sales volumes) by a few percentage points. West Bengal and Kerala run the most number of paper lotteries in India.
“If more states decide to float lottery schemes, we’ll be able to raise at least Rs 50,000 crore… That’s good money to fund Ayushman Bharat or education for-all programmes,” Vijay adds.
Leading lottery marketers such as Sugal & Damani have written to the Centre and state governments extolling the virtues of lottery-funded social welfare programmes. Their blueprints pivot around success stories in China and the UK.
China’s Welfare Lottery and Sports Lottery grossed total revenue of 426.6 billion yuan (roughly `4.5 lakh crore) in the previous fiscal, “equivalent to the entire financial revenue of the city of Beijing,” as stated in a communiqué by the Chinese ministry of finance. The funds are used to support social welfare and sporting activities. The UK hosted the London Olympics via its National Lottery Programme.
A media report quoting Dianne Thompson, who headed Camelot Group (one of the operators of UK’s lottery programme) for over a decade, states that the National Lottery has spent over 4 billion pounds on sports since 1994 and 86% of athletes in Team Great Britain received some form of lottery support.
“Lottery is a good way to support social ventures, but not in the current form,” says Sayta. “If you count out Kerala, which runs its lottery programme directly, most state governments are not getting any meaningful funds selling lotteries. Large-sized distributors corner most of the profits; states are paid just pittance.”
Isaac echoes Sayta’s views. Lottery marketers, more often than not, make no pay-in of lottery proceeds to the government on time, says the minister.
“States should run their lottery programmes directly… Lottery-issuing states are now getting duped by these large distributors. They hardly get Rs 10-20 crore, while we in Kerala generate close to Rs 4,000 crore every year.” According to experts, large companies work in tandem to get lottery-marketing mandates from states. They operate as cartels – not stepping into each others’ territory or placing competitive bids when marketing mandates are called for by state governments.
The Kerala government has reached out to Punjab, Maharashtra, Bengal and Goa to help roll out programmes directly. “We’ll help them move out of the clutches of large distributors. We’ll train their officers and be their knowledge partner,” Isaac promises. Fingers crossed.
“This Article First Published on economictimes.indiatimes.com“