Introduction: The Ministry of Finance has intensified its efforts to combat tax evasion, particularly by lottery distributors. In a recent revelation, 12 cases of GST evasion amounting to Rs. 344.57 crore have been detected, with a successful recovery of Rs. 621.56 crore between July 2017 and November 2023. The Union Minister of State for Finance, Dr. Bhagwat Kisanrao Karad, addressed the issue in a written reply to a question in the Lok Sabha, shedding light on the government's proactive stance against financial irregularities.

Detailed Analysis:

1. Formal Banking Channels and Money Laundering Mitigation: Minister Kisanrao Karad emphasized the importance of using formal banking channels for transactions, including the disbursement of lottery prizes. This measure is seen as a crucial step in mitigating the risks associated with money laundering, terrorist financing, and proliferation funding. The Minister highlighted the robust banking system and effective regulation/supervision of regulated entities as key factors in ensuring financial integrity.

2. Income-tax Act Section 194B and Tax Deduction: Referring to Section 194B of the Income-tax Act, the Minister explained that individuals responsible for paying income exceeding ten thousand rupees from lottery winnings are required to deduct income tax at the prevailing rates. With the recent amendments in the Finance Act 2023, the applicable rate is 30%, encompassing both cash and in-kind winnings. Section 115BB of the Act specifies the tax rate, disallowing deductions on such winnings.

3. Government's Response to Tax Evasion: The Minister assured that the Income Tax Department promptly takes action upon receiving credible information about tax violations. This includes conducting thorough investigations, implementing search and seizure or survey actions, and performing assessments as per the provisions of the Act. In the context of lottery distributors, the Income Tax Department detected 12 cases of GST evasion, totaling Rs. 344.57 crore. A commendable recovery of Rs. 621.56 crore, inclusive of interest and penalties, underscores the government's commitment to curbing tax evasion.

Conclusion: The Ministry of Finance's resolute actions against tax evasion by lottery distributors signify a proactive approach in maintaining financial integrity. The stringent measures, including the use of formal banking channels and amendments in tax laws, aim to strengthen the regulatory framework and discourage illicit financial activities. The successful detection and recovery of significant amounts underscore the government's commitment to ensuring compliance with tax laws and safeguarding the nation's financial interests.

Ministry of Finance

Tax evasion by lottery distributors

12 cases of GST evasion of Rs. 344.57 crore detected and Rs. 621.56 crore recovered against lottery distributors between July, 2017 to November 2023

A reference was received from Ministry of Home Affairs (MHA) for comments regarding disbursement of prize amount of lotteries through formal banking channel and comments in this regard have been sent to MHA. This was stated by Union Minister of State for Finance Dr. Bhagwat Kisanrao Karad in a written reply to a question in Lok Sabha today.

Elucidating further, the Minister stated that using formal banking channel for any kind of transaction, including disbursement of lottery prize, is helpful in mitigating the associated money laundering/terrorist financing / proliferation funding risks in view of the robust banking system and effective regulation/supervision of the regulated entities.

In reference to the Section 194B of the Income-tax Act, 1961 ('the Act'), the Minister stated that the person responsible for paying to any person any income by way of winnings from any lottery or crossword puzzle or card game and other game of any sort or from gambling or betting of any form or nature whatsoever, being the amount or the aggregate of amounts exceeding ten thousand rupees during the financial year shall, at the time of payment, deduct income-tax at the rates in force.

The Minister further stated that vide Finance Act 2023, the rate in force is 30%. This also includes winnings in kind or partly in cash and partly in kind. It is substantively charged to tax at the rate of 30% under section 115BB of the Act and no deduction on the winnings is allowed.

On the question of tax evasion by lottery distributors, the Minister stated that the Income Tax Department takes appropriate action in cases involving evasion of tax whenever any credible information/intelligence of violation of provisions of Direct Tax Laws relating to any taxpayer comes to its notice. Such action under Direct Tax laws includes conducting enquiries, mounting search and seizure or survey action, assessment and consequential actions thereto, wherever applicable as per the provisions of the Act. Twelve (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.