The Hindu : Karnataka / Bangalore News : Excise wing swoops on mother of all tax evasions

Online edition of India's National Newspaper
Thursday, Mar 13, 2008
ePaper | Mobile/PDA Version

Karnataka

Karnataka - Bangalore

Excise wing swoops on mother of all tax evasions

Staff Reporter

Two Coimbatore-based lottery distributors evade Rs.2,162 crore in service tax

BANGALORE: In the biggest ever service tax evasion reported in the country, the Central Excise Intelligence (Bangalore Zone) has detected an evasion of Rs.2,162 crore by two Coimbatore-based paper lottery distributors having pan-India operations.

The detection is likely to have a larger implication on service tax collection, which could go up by Rs.1,000 crore annually.

Disclosing this to presspersons here on Wednesday, Additional Director-General Central Excise Intelligence Somesh Arora said the distributors, along with a couple of others from Coimbatore, control 80 per cent of the total paper lottery sales in India. “These distributors referred technically as sole distributors/sales agents have an annual turnover anywhere between Rs. 8,000 crore and Rs. 10,000 crore.”

The service tax evasion was detected in September 2007. The Central Excise recovered Rs.5 crore and issued a show-cause notice to the distributors. Mr Arora said: “The previous biggest tax evasion was reported when ITC was found to have evaded Central Excise duty to a tune of Rs.800 crore during the late 1980s.”

Modus operandi

In the lottery business, for every rupee, more than 60 paise goes to the award pool, three to four paise goes to the State government and the commission for the distributor is fixed at 14 paise.

Mr. Arora said: “Though they were charging 14 per cent from the respective State governments (organised lotteries are sponsored by State governments), they were not paying service tax.” The distributors had not registered with the Service Tax Department, thus evading tax on the commission they were earning.

Implications

The detection follows an announcement by the Union Finance Minister in the recent budget that organising or conducting lottery comes under the category of “Business Auxillary Service.”

Mr. Arora said that the following the detection, the Union exchequer will receive an additional service of Rs. 1,000 crore annually only from the turnover of paper lottery.

Printer friendly page
Send this article to Friends by E-Mail

Karnataka