India: Tax Authorities Find Online Betting and Gambling Platforms Using Evasion Techniques

New Delhi: Tax inspectors are investigating ways to stop this type of tax fraud after discovering that overseas companies providing mobile apps for Indian people with online betting and gaming platforms have violated the GST rules.

All offshore businesses that offer services in India are obliged under the Goods and Services Tax (GST) legislation to register as suppliers of OIDAR (Online Information Database Access and Retrieval) services.

Numerous offshore companies, according to the source, offer websites for online betting and gambling in the nation, but they are not GST-registered, meaning they are not paying the obligatory GST.

“We are pursuing such instances and seek to bring them inside the GST net,” the source told PTI. “Although some international educational institutes offering online courses in India are registered as OIDAR, the firms providing online gaming, betting, and gambling platforms are not registered under GST.

For free, these gambling and online betting applications can be downloaded from the Google Play Store for Android users and the App Store for iOS users.

According to the source, these businesses must pay GST because they are taking money and providing services within the nation. It is challenging to serve notices on these businesses, however, as they do not have a stable establishment or a physical presence in India.

We are attempting to bring such platforms into the tax net, but a number of these organizations often change their bank accounts maintained overseas, making it difficult to trace them, the source said.

Additionally, the Foreign Exchange Management Act (FEMA) forbids sending money abroad to bet or gamble, and the Enforcement Directorate may look into such activities.

Gaming companies are being investigated by the GST for allegedly evading taxes by around 23,000 crore between April 2019 and November 2022, according to a written response provided by the Finance Ministry in Parliament in December of last year.

Additionally, the Enforcement Directorate has attached criminal proceeds totaling more than 1,000 crore in a number of cases involving cyber and cryptocurrency crimes, in which online gaming and other activities were exploited to divert the earnings.

In the meantime, the Ministry of Electronics and IT (MeiTY) announced regulations for the internet gaming industry earlier this month, outright banning any games that involve betting or wagering.

The web gaming industry will operate under a self-regulatory paradigm and will first alert three self-regulatory organizations (SROs) to the games that can legally be played in the nation.

The insider claimed that the GST intelligence wing will develop its own mechanism to combat the threat of tax evasion once the MeiTY regulations are put into practice.