GST Reform Puts Lottery-Dependent States Under Pressure

The central government’s proposed GST rationalisation has sparked fresh concerns for states heavily dependent on lottery revenues. The move to raise the GST rate on lotteries from 28% to 40% could create fiscal uncertainty for Kerala and Punjab, two of India’s largest lottery markets.

Kerala at the Epicenter of Impact

For Kerala, which accounts for nearly 97% of India’s lottery revenues, the reform poses a significant blow. The state has budgeted over ₹14,000 crore in lottery revenues for FY26, but a sudden increase in GST to 40% would be “fiscally unsustainable,” tax experts have warned.

Kerala’s lottery receipts have steadily grown from ₹5,445 crore in FY15 to over ₹14,100 crore projected for FY26, underscoring its reliance on this source.

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Punjab Faces Rising Dependence

Punjab, though smaller in scale, faces similar risks. Its lottery revenues have grown fourfold over the past decade, touching ₹250 crore in FY26 compared to just ₹70 crore in FY15. The rapid growth highlights how increasingly reliant the state has become on lottery collections.

Other states like West Bengal, Maharashtra, and Goa also run lotteries, but their revenue contributions remain relatively modest.

Market Insights & Update

• A higher 40% GST rate could discourage participation in lotteries, shrinking state revenues.

• Fiscal pressure may force affected states to explore alternative revenue streams.

• Investors and markets will closely watch how this reform influences state budgets and welfare spending.

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