Rs.21 bn tax evasion by lottery distributors detected

March 13th, 2008 - 9:28 pm ICT by admin  

A file-photo of P. Chidambaram

Bangalore, March 13 (IANS) Two Tamil Nadu-based paper lottery distributors have evaded service tax of about Rs.21 billion ($52.5 million) in the last five years, officials here said after detecting what they described as the county’s biggest tax evasion case in recent years. The total turnover of the two lottery distributors, with their main office in Coimbatore and all-India presence, since 2003 would be around Rs.180 billion, a senior official of the Central Excise Intelligence said here.

“The service tax owed by the two distributors comes to around Rs.21 billion and after detecting their tax evasion, we have directed them to pay up,” K.V.V.G. Diwakar, joint director at Directorate General of Central Excise Intelligence (CEI), Bangalore Zone, told IANS Thursday.

However, he declined to name the distributors.

“They have paid Rs.50 million and adjudication is on to recover the remaining dues,” Diwakar said, adding that the process would be completed in three to four months from now.

According to Somesh Arora, additional director-general of CEI, the two distributors with a few others from Coimbatore control 80 percent of the total paper lottery sales in the country.

“These distributors (known in trade circles as sole distributors/sales agents) have an annual turnover anywhere between Rs.80 billion and Rs.100 billion,” he said.

Union Finance Minister P. Chidambaram’s announcement in the 2008-09 budget that organising or conducting lottery comes under the category of “business auxiliary service,” means the service tax collection in the country could go up by as much as Rs.10 billion annually, Diwakar said.

Giving a break-up of the lottery business, Arora said of every rupee collected through lottery, more than 60 paise go to the award (lottery prize money) pool, three to four paise to the state government organising the lottery, and 14 paise as commission for the distributor.

“Though they (the two distributors) were charging 14 percent from the respective state governments, they were not paying service tax. They have also not registered with the service tax department (to avoid paying taxes),” he added.

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