Tax pressure on offshore online gaming enterprises

The Directorate General of GST Intelligence (DGGI) has taken action against companies with offices in Cyprus, Mauritius, and the Cayman Islands that offer online gambling and betting, some of which are allegedly masquerading as platforms for fantasy games.

According to persons with knowledge of the situation, these companies—which are not registered in India—were assisting numerous high-net-worth individuals (HNIs), including some celebrities and social media influencers, in laundering money abroad.

38 such portals that provide services in India but have not paid any goods and services tax have been identified by tax authorities. According to initial projections, tax evasion will cost 12,000 crore between April 2019 and November 2022.

These businesses have received letters from the tax authorities, and the inquiry is still underway.

Income Tax Department also looking into matter

One official said, “While some of the companies were posing as platforms for fantasy games, they were meant purely for betting and gambling and users included HNIs, social media influencers, and the amount was being deposited to their foreign account for which no income tax has been paid.” We also shared the data with other organisations because it was challenging for us to trace all of the customers because payments were made with foreign cards and cryptocurrencies.

The tax agency will write to the ministry of electronics and information technology (MeitY) to request that these businesses deactivate their gaming websites unless they pay the back taxes owed and register for GST.

The income tax division is independently investigating the sites and significant participants on them for potential tax evasion.

Both policymakers and the domestic gaming sector, which believes that these offshore-based players are distorting the market, have expressed worry about the online gaming business.

The head of legal and policy of Mobile Premier League, Dibyojyoti Mainak, stated that the offshore online gambling organisations provide the biggest problem. (MPL). “The domestic industry loses a significant amount of revenue to these foreign players despite being largely self-regulated.” He claimed that Indian customers bring in $15–20 billion annually for the offshore businesses.

The Central Board of Indirect Taxes and Customs has opened investigations into several gambling enterprises with locations in India and abroad for what is thought to be GST Evasion of Rs.22,936 crore, the finance ministry informed Parliament last month.