Lottery Tax Evasion in India

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All of us are fond of extremely exciting lottery movies revealing the stories of lucky beggars who managed to hit a jackpot or whatever. However, the reality is much more complicated. For instance, some of the most successful lottery distributors were caught the other day attempting to evade from paying lottery taxes in India. Neither the journalists nor the government hesitated to reveal the names of the violators along with their enterprises – those are Martin Group’s Future Gaming and Hotel Services, Sugal&Damani Group’s M/s Skill Lotto, and Essel Group’s E-Cool Gaming Solution.

It was Punjab’s central tax department that spotted the companies not complying with the fixed GST rate. What’s more, these top distributors are suspected to have dodged from filing GTS returns. The department registered that Future Gaming had cut short the 28% of the GTS rate they were supposed to pay to just 12%. Thus, the enterprise owes about $839,000 which is an arm an a leg for Martin Group, especially compared to what it could’ve paid in parts instead. Another law-breaking firm, E-cool, literally copied the numbers of Future Gaming’s tax payment by filing the same percentage of payment – 12%! Still, E-cool owes a little less to the government which is about $555,000. As for M/s Skill Lotto, the exact sum of debt is still being calculated. It’s worth mentioning that GST Council doesn’t impose taxes on lottery winnings, regardless of the amount that gamblers get from the game. It’s only gambling business owners who have to give a good bite of their income to tax authorities while there’s no tax on both biggest lottery wins and minor prizes yet.

Lottery officials faced new taxation rules in 2017 when the Indian government implemented a new GST tax rate for lotteries – tax authorities doubled the previous amount. Additionally, they imposed different tax rates based on whether the lottery is distributed by a state organization or a governmental one: state lotteries are mandated to pay 28% from their income while the lotteries, backed up by the government, have been indulged with 12% of GST tax. Moreover, to no one’s surprise, the GTS Council was strongly and unceremoniously bawled out by the significant majority of gambling business entrepreneurs. As much as the business owners were trying to stretch a point, the Council remained adamant as hell neglecting the numerous rebukes on their behalf and leaving it intact.

The current status of the lottery in India signals of the critically low popularity of gambling in this tradition-stickler country – only 13 states out of 29 authorize lotteries. These states are Kerala, Goa, Maharashtra, Madhya Pradesh, Punjab, West Bengal, Assam, Arunachal Pradesh, Meghalaya, Manipur, Sikkim, Nagaland, and Mizoram. Nevertheless, the gambling bosses of these in-minority states have managed to artfully avoid paying taxes to the extent that Indian Central Board of Direct Taxes had to right away tackle this common violation by passing a series of laws aimed at eradicating this scam tendency.

Taking a more rigorous look into widespread tax evasion in India, it should be said that  Indian Central Board of Direct Taxes previously reported the increase in the number of prosecution cases which was of more than six times from 669 in 2015 to 4,524 in 2017. Moreover, it does look like lottery bosses must’ve contributed immensely to this enormous number. Interestingly, tax evasion rates in the U.S. are far lower compared to those in India. There’s also a shared hunch as to why the U.S. entrepreneurs are more law-abiding. The suspicion suggests that in the United States, the government has been steering clear of enacting the state tax laws that are so debilitating to the lotteries. However, that is not the case in India these days. Well, such a radical approach to the private business sector in this country is just one more peculiarity of India “keeping up” with the democratic movement of the contemporary world.