11/04/23

INDIA: 38 Offshore Betting Platforms In Trouble For Evading INR 12,000 Cr In Taxes.

As published on inc42.com, Tuesday 11 April, 2023.

Cracking the whip on offshore gambling platforms, the Directorate General of GST Intelligence (DGGI) has issued notices to as many as 38 such platforms for allegedly laundering money and syphoning off taxes.

The initial probe revealed that the entities in question were not based out of India and were enabling many high-net-worth individuals (HNIs), including celebrities and social media influencers, to launder money abroad, according to an ET report.

Mainly based out of tax havens, such as the Cayman Islands, Cyprus and Mauritius, these 38 companies are also in the dock for allegedly not paying any goods and services tax (GST). Tax authorities have pegged the quantum of tax evasion at around INR 12,000 Cr for the intervening period between April 2019 and November 2022.

In coordination with the Income Tax Department, a full-blown probe is underway, the report added.

The tax authorities also flagged a growing trend among these online betting and gambling websites, posing as fantasy game platforms, of evading taxes and laundering cash. The report further stated that the payments to these platforms were made by using international cards and cryptocurrencies, making it difficult to trace the origins of the money trail.

“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,” a tax official said.

Indian authorities have also shared the data with other agencies globally to track such users.

People familiar with the development also noted that these offshore entities will have to cough up the outstanding taxes and undertake GST registration to operate in the country. If these companies do not comply with the norms, the tax authorities plan to write to the Ministry of Electronics and Information Technology (MeitY) to block such gaming sites.

Alongside offshore betting platforms, the IT Department is also looking into major gaming platforms operating in the country for possible tax evasion.

The crackdown comes at a time when the government has tightened its noose around offshore betting platforms and ramped up the regulatory purview of the local online gaming industry.

In December last year, the Union government directed Google to stop displaying all kinds of ads from overseas online betting companies. This came close on the heels of the Ministry of Information and Broadcasting (MIB) issuing two separate advisories for broadcasters, streaming platforms and digital news publishers, warning of hefty penalties for showing online betting ads.

In June, the Ministry also warned TV channels against carrying any such ads. But, many of these offshore gaming platforms have also found multiple ways to circumvent local laws. In multiple instances, the Centre flagged the employment of surrogate means by these platforms to woo users, including branding themselves as ‘sports news websites’ and by sponsoring high-profile sports teams.

This also comes days after the Centre unveiled online gaming norms that formulated a regulatory framework to oversee the burgeoning industry. Close on the heels of that, Tamil Nadu also implemented new rules that ban online gambling altogether in the state after receiving the Governor’s assent.

Through the crackdown, Indian authorities have been looking at curbing these offshore betting platforms and bringing them under the regulatory ambit. The Centre also wants to ensure that these international platforms cough up their share of taxes and act on instances of money laundering.

Such has been the scale of the tax evasion that the Centre, earlier in December 2022, informed the Parliament that the Central Board of Indirect Taxes and Customs (CBIC) was probing gaming companies for alleged GST evasion to the tune of nearly INR 23,000 Cr.