NEW DELHI: The GST department has identified 658 offshore online gaming companies as non- registered/non-compliant and has initiated investigation against the same. As many 167 URL/websites have been recommended for blocking.
The investigation wing of the GST department – Directorate General of GST Intelligence (DGGI) – in its annual report has revealed that real money online gaming companies are the biggest tax evaders with Rs 82,000 crore evasion detected in FY24, which is 41% of the total Rs 2 lakh crore evasion detected during the year.
The DGGI Annual Report reveals that the department has initiated actions against 118 domestic online gaming companies, and Show Cause Notices have been issued to 34 taxpayers involving tax amount of Rs 1,10,531.91 crore. The department says that bringing offshore gaming companies under the tax net is a challenge as many such firms are set up in offshore tax havens -- Malta, Curacao Islands, British Virgin Islands, Cypress etc -- known for their opacity.
“There are online gaming platforms who keep on changing their URL/website/apps to avoid tax compliance. Use of dark web or VPN based platforms for such supply further accentuates the difficulties in tax law enforcement,” says the DGGI Annual report.
Meanwhile, the GST department has managed to collect Rs 2,675 crore from 574 offshore entities offering digital services to Indian entities in FY24. The annual revenue from offshore entities has increased from Rs 80 crore in FY 2017-18 to Rs 2,675 crore in FY24.
In GST parlance, services that are delivered over the internet or electronic network are called Online Information and Database Access or Retrieval services (OIDAR Services). These services include cloud services, digital content, online gaming, online advertising etc. According to the DGGI, when such services are provided by an offshore entity in a taxable territory, the supplier becomes liable for obtaining registration and discharging GST on the same.
The fact that service providers are located abroad and are liable to discharge tax to the Indian government for such supplies create challenges in GST enforcement, however, efforts by DGGI in reaching out to such suppliers have resulted in various such suppliers coming onboard and taking registration and discharging tax. According to DGGI, several such offshore service providers are ignorant of the law, and upon conveying the legal position clearly, such suppliers agree to comply with the GST mandate.
The department has named companies like Udemy Inc (USA), Canva Pty (Australia), OVH group (France), and Blackboard (Netherlands) who registered themselves following the efforts of DGGI and discharged significant tax liability. “However, there are other entities that are non-cooperative and appear to intentionally avoid tax compliance,” says DGGI in its annual report for FY24.
These include various online casinos based out of tax-havens like Malta, Cypress, Curacao, BVI etc. There are also other entities that are difficult to reach out to on account of them operating through VPN or cloud-based platforms.