GST officers detect tax evasion by offshore entities providing online betting, gambling

Tax officers have detected violation of GST law by offshore entities offering online betting and gambling platforms to Indian residents through mobile apps and are working on ways to tackle such mode of tax evasion, a source said.

As per the prescribed procedure, all offshore entities providing services in India are required to register as supplier of OIDAR (Online Information Database Access and Retrieval) services under the Goods and Services Tax (GST) law.

According to the source, there are many offshore entities providing platforms for online betting and gambling in the country but are not GST-registered and hence are not paying the required GST.

"Although several overseas educational bodies offering online courses in India are registered as OIDAR, the entities providing online gaming, betting ad gambling platforms are not registered under GST. We are pursuing such cases and hope to bring them under the GST net," the source told PTI.

These online betting and gambling apps are available on Google Play Store for android phone users and App Store for iOS users and can be freely downloaded.

The source said since these companies are collecting funds and offering services in the country, they are liable to pay GST. However, as these entities do not have a permanent establishment or a physical presence in India, it is difficult to serve notices to them.

"Several of these companies frequently change their bank accounts maintained overseas and hence tracing them is a problem. We are trying to bring such platforms in the tax net," the source said.

Also, the Foreign Exchange Management Act (FEMA) prohibits outward remittances for betting and gambling and such activities can be probed by the Enforcement Directorate. According to a written reply given by the Finance Ministry in Parliament in December last year, GST officers are investigating tax evasion of about Rs 23,000 crore by gaming companies between April 2019 and November 2022.

Besides, the Enforcement Directorate has attached proceeds of crime of more than Rs 1,000 crore in several cases related to cyber and crypto frauds wherein online gaming etc have been used for siphoning the proceeds.

Meanwhile, Ministry of Electronics and IT(MeiTY) earlier this month notified norms for the online gaming sector, which categorically prohibits all such games involving betting and wagering.

The online gaming sector will follow self-regulation model and will initially notify three self-regulatory organisations (SROs) that will approve the games that can operate in the country as per the rules. The source said that once the MeiTY norms are operationalised, the GST intelligence wing will evolve its own mechanism to deal with the menace of tax evasion.

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