Kerala govt for new law to protect lottery revenue

Existing regulation inoperative with GST roll out; state was hoping for Rs 7k cr from levy in 2017

The government of Kerala is contemplating a new law to protect its revenue from the lottery segment after the new national goods and services tax (GST) gets implemented. The state's annual revenue from lottery sale exceeds Rs 4,000 crore.

With GST implementation, the Kerala Tax on Paper Lotteries Act of 2005 will be inoperative, says the state government.

Kerala, unlike neighbouring Tamil Nadu, has been allowing lottery sales for long. With a large number of lotteries operating through agents in the state, there were allegations of lack of transparency and complaints of non-payment of the price money, which resulted in public protest and several cases in court. So, the law was enacted in 2005, allowing the state to inspect various processes, including printing of the lotteries, and to control the sales if operations were not transparent or as in the regulations.

The Act also allowed the government to put a Rs 10 lakh tax on every bumper draw of paper lotteries and Rs 2.5 lakh in respect of any other draw, to be paid by each promoter. And, state government lotteries became the dominant player.

"State lotteries are mostly associated to social causes, such as the Karunya Lottery in which the profit is used for medical services to the poor and cancer patients," says V S Mani, president of the Kerala State Lottery Agents and Sellers Union (affiliated to the pro-Marxist Centre for Indian Unions). "This took away the profit and price motive from the process. While price is a factor, people buy tickets to help someone."

Adding: "Once lotteries from other states return, it would again go back to the levels of gambling, affecting the lives of many. This would again result in public ire against lotteries. This will also affect the agents and sellers."

Around 125,000 people are employed in the sector in Kerala, including the agents and sellers. Various trade unions in the sector have come together to form a forum to ask the Centre to allow state governments to control the segment, and to exempt service tax on government lotteries within GST. The state government was expecting Rs 7,000 crore revenue from lotteries this year, they said.

The state is looking at possibilities to bring in a new Act to protect the state lottery, said T M Thomas Isaac, finance minister, in the legislative assembly recently. "Subsuming of lottery tax in GST in the Constitutional amendment itself is a setback to our position."

During 2016-17, there was an increase of 18 per cent in the income from sale of lotteries; it was hit by demonetisation, he said.

"With implementation of GST, the tax laws on paper lotteries will become inoperative. This is a serious issue. We have to explore the possibility of new legislation within the legislative jurisdiction of the state assembly. The government is seriously considering to enact a new law for imposing a licence fee on the draws of paper lotteries. Considering the urgent requirement for such a law, the government has decided to present a new Bill for the purpose," he'd said while presenting the state budget proposals.