How offshore-based online gaming apps are evading taxes, hitting Indian economy

(Report By Orin Basu)

The cricketing season has Indians glued to their TV sets. The IPL, followed by Asia Cup, and now India’s spectacular performance in the T20 World Cup have left fans longing for more. Punctuating the overs are advertisements of various betting and online gaming apps, often endorsed by our favourite cricketers and actors. Not just that, such advertisements are all over digital platforms, social media and roadside billboards. But there’s a red flag.

Many of these apps are operating from outside the country and involved in tax evasion. The revenue department is in talks with MeITY to ban these offshore online betting platforms and has shared a list of over two dozen such apps, including Parimatch, DafaBet, Betway, 22 Bet and 1xBet.

It is keeping a close watch on their operations and the sort of revenue they are generating on which tax is being evaded. The Directorate General of GST Intelligence, Income Tax department and Enforcement Directorate are also monitoring these apps closely, and expected to crack down on them pretty soon.

Conservative estimates put India’s online gaming industry at worth $2 billion. At present, GST laws for ‘games of chance’ (betting or gambling) and ‘game of skill’ are vastly different. Games of skill are taxed at 18 per cent GST on the platform fee, while games of chance are taxed at 28 per cent GST on the contest entry amount. This means such apps are expected to generate revenue to the tune of $40-50 crore, but a significant portion of this amount never lands in the public exchequer’s account.

The situation of offshore online gaming platforms is in sharp contrast to their Indian counterparts that are facing serious challenges due to lack of government regulations, taxation and Google’s policy changes. It is estimated that offshore gambling sites such as Dafabet, Betway, Bet365, Parimatch, Fairplay and 1xbet are making Indian online gaming industry poorer by at least $25-30 billion!

Most offshore betting businesses operate from Malta, Curacao, Belize, Gibraltar and Isle of Man that have loose tax regulations. The owners are based out of India, though they have Indian connections. These companies use the sports and entertainment media to promote their businesses, though the Indian government has already banned sham advertisements of these offshore gambling firms.

If some media reports are to be believed, these platforms garner more than Rs 5,000 crore every month in India. With such money, they are able to woo bigger broadcasters easily, and book their space on TV, digital and OTT platforms, albeit in surrogate ways. They have opened ‘news’ websites, tied up with teams as sponsors where their logos appear on team jerseys and flooded top websites with clickable banners.

Source: 2C Team