Tax on winning prizes

[SPIC Ltd.]

Dear Sir

Wish you a blessed and prosperous New Year 2012! 

I recently won a bike (TVS Wego) in a lucky draw contest. The OTR price of the bike is Rs.56945/- and the ex-showroom price is Rs.48903/- which includes a VAT of Rs.6318/-. When I went to the showroom to collect my prize, the dealer told me that I have to remit 30% tax on the ex show room price of the bike. The dealer also told me that apart from paying this 30% on Rs. 48903/-, I should also bear the VAT, registration & insurance charges and  other taxes like road tax etc. Considering all this, my overall liability comes to around Rs.23000/-. I am quite doubtful whether the dealer is giving me the right information regarding the payment. I request you to kindly clarify whether I am liable to make the above payments as required by the dealer. 

Thanking you

Regards

Eva Dhurairaj

AI Summary

Lucky Draw Bike Winner Tax: Sponsor Must Deduct 30% on Prize, Winner Pays VAT, Registration, Insurance. A user inquired about the tax obligations on winning a bike in a lucky draw, specifically questioning the dealer's claim that they must pay 30% tax on the ex-showroom price, along with VAT, registration, insurance, and other charges, totaling approximately Rs. 23,000. The response clarified that the winner is responsible for paying a 30% tax on the prize value, but the tax should be deducted and deposited by the sponsor, not requiring confirmation of payment from the winner.