The Goods and Services Tax (GST) proposal to increase taxes on lotteries from 28% to 40% is raising concerns for states like Kerala and Punjab. These states rely heavily on lottery revenues to fund their budgets, and a higher tax could make their lottery systems less profitable.
Kerala is the biggest player in India’s lottery market, accounting for nearly 97% of the country’s total lottery revenue. For the financial year 2025-26, Kerala planned to collect over ₹14,000 crore from lotteries. If the GST rate is raised to 40%, this could severely affect the state’s finances.
As per news reports, such a high tax rate would be fiscally unsustainable. This means Kerala may struggle to maintain its lottery system and the income it generates for the state.
Punjab’s lottery revenues are much smaller than Kerala’s but have grown quickly over the past decade. From ₹70 crore in 2014-15, the revenue increased to ₹250 crore by 2025-26. Lottery earnings now make up about 2% of Punjab’s non-tax revenues.
A 40% GST rate could slow down this growth and reduce the money Punjab depends on from lotteries.
Over the past 10 years, lottery revenues have nearly tripled in India’s top five states. Kerala’s lottery revenue rose from ₹5,445 crore in 2014-15 to over ₹14,000 crore expected in 2025-26. Punjab also saw its revenues increase more than three times in the same period.
The proposed tax hike affects not only lotteries but also online real-money gaming, currently taxed at 28%. The gaming industry is growing fast, with users spending around ₹10,000 crore in July alone. As per news reports, raising the GST to 40% could slow down growth and innovation in this digital sector, which plays a key role in the digital economy.
Read more: What Is GST Compensation Cess And How Will It Change Under Next Gen GST? Reforms Explained.
The GST Council’s proposal to raise taxes on lotteries and online gaming from 28% to 40% could seriously harm states like Kerala and Punjab that rely on lottery income. It might also affect the fast-growing online gaming industry. The final decision by the GST Council will shape the future of these important revenue sources.
Disclaimer: This blog has been written exclusively for educational purposes. The securities or companies mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Published on: Aug 21, 2025, 2:22 PM IST
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