GST Evasion of Rs. 344.57 by Lottery Distributors

A total of 12 cases involving GST evasion of Rs. 344.57 crore have been detected against lottery distributors and Rs. 621.56 crore (including interest and penalty) has been recovered/ realised from July, 2017 to till November 2023, Minister of State for Finance Bhagwat Karad in a written reply to the Lok Sabha.

The Ministry of Home Affairs (MHA) received a reference asking for feedback on the distribution of lottery prize money via official banking channels. MHA has received comments in this regard. In a written response to a question asked in the Lok Sabha today, Union Minister of State for Finance Dr. Bhagwat Kisanrao Karad made this claim.

Further elaborating, the Minister said that because of the strong banking system and efficient regulation/supervision of the regulated entities, using formal banking channels for any kind of transaction—including the distribution of lottery prizes—helps mitigate the associated risks of money laundering, terrorist financing, and proliferation funding.

Regarding Section 194B of the Income-tax Act, 1961 (hereinafter referred to as “the Act”), the Minister declared that whoever is in charge of paying someone money earned from winnings in lotteries, crossword puzzles, card games, and other games, or from gambling or betting of any kind, provided that the amount or total of all winnings exceeds ten thousand rupees for the financial year, must deduct income tax at the applicable rates at the time of payment.

The Minister went on to say that the rate in effect is 30% as per the Finance Act of 2023. This also applies to prizes that are partially paid out in cash and partially in kind. Under section 115BB of the Act, it is substantively subject to tax at the rate of 30%, and no deduction on the winnings is permitted.

Concerning tax evasion by lottery distributors, the Minister clarified that the Income Tax Department takes appropriate action in cases involving tax evasion as soon as it receives reliable information or intelligence about a taxpayer’s potential violation of any direct tax law provision. Under direct tax laws, these activities include making inquiries, mounting searches and seizures or survey actions, assessment, and related follow-up actions, as appropriate under the Act’s requirements.