Lok Sabha Question No. 3113 (UNSTARRED), answered on 2023-03-20
Subject: Regulation of Online Games and Lottery
Ministry: FINANCE
Asked by: Sujay Radhakrishna Vikhepatil, Unmesh Bhaiyyasaheb Patil

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF ECONOMIC AFFAIRS

## LOK SABHA UNSTARRED QUESTION NO. 3113

TO BE ANSWERED ON 20 TH  MARCH, 2023/Phalguna 29, 1944 (SAKA)

## Regulation of Online Games and Lottery

## 3113.  DR. SUJAY RADHAKRISHNA VIKHE PATIL: SHRI UNMESH BHAIYYASAHEB PATIL:

Will the Minister of FINANCE be pleased to state:

- (a) whether the Government proposes to constitute a regulatory body to regulate online gaming in the country and if so, the details thereof;
- (b) whether  the  Government  proposes  to  constitute  a  regulatory  body  to  protect revenue leakage in lottery industry and if so, the details thereof;
- (c) whether the Government proposes to bring monetary prize won under lottery system and online gaming under the purview of TDS in the latest budget and if so, the details thereof;
- (d) the  steps  taken  by  the  Government  to  recover  GST  on  illegal  sale  of  paper lotteries in the State of Bihar, Jharkhand and Odisha;
- (e) the  steps  taken  by  the  Government  to  check  money  laundering  in  lottery business; and
- (f) the action taken by the Government against lottery distributors who indulged in evasion of GST, TDS etc. on the basis of complaints received from general public or from the Ministry of Home Affairs?

## ANSWER

## MINISTER OF STATE IN MINISTRY OF FINANCE (SHRI PANKAJ CHAUDHARY)

(a): The Government of India has allocated matters related to online gaming to the Ministry  of  Electronics  and  Information  Technology.  The  Central  Government,  in exercise of powers conferred by the Information Technology Act, 2000, has made the Information  Technology  (Intermediary  Guidelines  and  Digital  Media  Ethics  Code) Rules,  2021.  These  rules  cast  specific  obligation  on  intermediaries,  including intermediaries offering online games, to observe due diligence and provide that if they fail to observe such due diligence, they shall no longer be exempt from their liability under law for third-party information or data or communication link hosted by them.

(b): There is no such proposal under consideration to constitute a regulatory body in this regard.

(c): Section  194B  of  the  Income-tax  Act,  1961  ('the  Act')  provides  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 in an amount  exceeding  ten  thousand  rupees  shall,  at  the  time  of  payment  thereof, deduct income-tax thereon at the rates in force. Hence, provisions for deduction of tax on any income by way of winnings from any lottery are contained under section 194B of the Act. The Finance Bill, 2023 (the Bill) proposes to amend section 194B to  provide  that  deduction  of  tax  under  this  section  shall  be  on  the  amount  or aggregate of the amounts exceeding ten thousand rupees during the financial year.

The Bill also proposes to amend section 194B of the Act to exclude online games from the purview of the section 194B from the 1st day of July, 2023, since a new section  194BA  is  proposed  to  be  introduced  for  deduction  of  tax  at  source  on winnings from online games from that date.

The new section 194BA provides that the person responsible for paying to any person any income by way of winnings from any online game during the financial year shall deduct income-tax on the net winnings in his user account, computed in the manner as may be prescribed, at the end of the financial year at the rates in force. In case there is withdrawal from user account during the financial year, the income-tax  shall  be  deducted  at  the  time  of  such  withdrawal  on  net  winnings comprised in such withdrawal. In addition, income-tax shall also be deducted on the remaining amount of net winnings in the user account at the end of the financial year. Net winnings shall be computed in the prescribed manner.

Further, the new section 194BA also provides that in a case where the net winnings are wholly in kind or partly in cash and partly in kind but the part in cash is not sufficient  to  meet  the  liability  of  deduction  of  tax  in  respect  of  whole  of  the  net winnings, the person responsible for paying shall, before releasing the winnings, ensure that tax has been paid in respect of the net winnings.

Moreover, if any difficulty arises in giving effect to the provisions of new section 194BA, the Board may, with the prior approval of the Central Government, issue guidelines for the purpose of removing the difficulty. Every such guideline issued by the Board shall be laid before each House of Parliament, and shall be binding on  the  income-tax  authorities  and  on  the  person  responsible  for  deduction  of income-tax on any income by way of winnings from online game.

(d):  No case of GST evasion by way of illegal sale of paper lotteries in the State of Bihar, Jharkhand and Odisha has been detected.

(e) & (f):  Whenever any credible information/intelligence/complaints of violation of Direct Tax Laws (including TDS) relating to any taxpayer comes to its notice, the Income  Tax  Department  takes  appropriate  action  including  issuing  notices, conducting enquiries, mounting search & seizure or survey action, and assessment and  consequential  actions  thereto,  wherever  applicable.  The  taxpayer  being investigated upon could be engaged in any business/sector/profession which could be in diversified activities/sectors of the economy, and such business/sector/profession  specific  details  are  not  separately  maintained  with CBDT. Further, the disclosure of information about specific taxpayer is prohibited except as provided under section 138 of the Act.

Based  on  the  information  received  from  informers  and  other  sources,  and intelligence developed by officers, 12 cases involving GST evasion of Rs. 344.57 Crore have  been  detected  against  lottery  distributors  and  Rs.  352.95  Crore (including interest and penalty) has been recovered/ realized from July, 2017 to till February 2023.

## ********