No Luck For India Legal Paper Lottery As Industry Estimated To Shrunk 70% Post GST

There might be no blanket ban on lotteries in India, but the introduction of the goods and services tax (GST) has dealt a blow to the industry-particularly for the paper lottery sector.

India Lottery's Rs 50,000 Crore Dilemma

The central government introduced in 2017 a nationwide GST, which also covers entertainment and gaming sectors. For the lottery sector, the GST Council imposed a dual tax rate-meaning that state-run lotteries have to pay a 12% GST rate, while private lotteries that are authorized by state governments have a higher 28% GST.

In December 2020, however, the Supreme Court ruled that all lotteries will have to pay the higher rate-28%-as they are considered "actionable claims" that come within the definition of "goods" under Section 2(52) of the Central Goods and Services Tax Act, 2017.

The fixed 28% GST rate was a major setback not just for the operators, but for many of the players along the distribution chain. A research report by ENV Media dissecting the Indian lottery market noted how the industry "is still regrouping to accept the new reality."

"The Indian lottery industry has not managed to transition," ENV Media research analysts said. "While paper-based State lotteries continue to offer cheap tickets through a million small retail points, some have closed, and others might have been tempted to sell fake tickets to make up for declining sales."

Rahul Tangri, president of Playwin's sales and distribution, told that the Indian lottery industry's estimated market size of Rs 50,000 crore per annum "likely to have shrunk to Rs 15,000 crore per annum"-a 70% decline-after the GST rate was introduced. The Playwin brand, operated by the Pan India Network company, was considered to be one of the largest online lottery companies in the country.

Here's Why India Lotteries Must Digitize

As mobile-first India grows into a global power in the online economy, the time is ripe for its lottery market to also make a transition. The country is estimated to have 760 million internet users, and more than half of those play online games at this point via their mobile devices-making the country the second-largest mobile gaming market.

This is an untapped market for the country's lottery operators, as the ENV Media report pointed out. Currently, online lottery operations in India mean tickets are still sold via retailers but are controlled by a central server operated by the state government. By digitizing the entire lottery operation, all stakeholders stand to benefit as the demand for online gambling continues to rise in the country. There are already several gambling sites offering lotto online, Purewin.com being on of them.

"An efficient online lottery distribution, on the other hand, would speed up sales and payouts, even if it leads to somewhat more expensive tickets and a relative tech barrier for some users," according to the ENV Media research. "However, provided that the average desi consumer feels comfortable using a mobile phone in this day and age - and that the demand for lottery games should be a constant in the long run - many States need to reconsider their stance on an online and mobile lottery if they are to make up their losses and prepare for the future of legal lotteries in India."

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