Ministry of Finance bats for disbursal of lottery winnings through formal banking channels, doubles GST recovery since March 2023

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Ministry of Finance on Monday informed Lok Sabha that 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.

The Ministry 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 Ministry 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 Ministry further informed the lower house of the Parliament 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 Ministry stated that the IT 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.

It is worth noting that the IT department in October 2023 raided Lottery King Santiago Martin’s business and personal premises at four locations in Coimbatore.

The Ministry said 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. The recovered amount has nearly doubled since March 2023 where stood at Rs. 354 crores then.

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