In a bid to track offshore online gaming companies and ensure they comply with goods and services tax laws, tax officials are working with the ministry of electronics and information technology. In some instances, websites and apps of these entities have been blocked as part of efforts by GST officials to ensure they register and pay tax in India.
The Directorate General of GST Intelligence, which has been investigating tax evasion by online gaming firms, is now focussing on these offshore entities.
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“While it has been easy to track online gaming companies headquartered in the country, there are a number of offshore entities engaged in online games and betting with real money through apps and websites. Since they are located overseas and are not even registered on the OIDAR platform, it is impossible to reach them and make them GST compliant,” said a source familiar with the development.
Under 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.
GST officials are now looking into how to tackle tax evasion by them and are working with Meity to block their access to Indian users by restricting their websites and apps, said the source but noted that this has had only limited success. Officials are also working on other measures to make these companies pay up. If needed the GST officials also plan to take support of other government agencies as part of the investigation.
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Sources indicated that domestic online gaming companies have now by and large become compliant with GST laws and are paying the tax dues. The DGGI had issued about three to four show cause notices to these firms in the past, including Rs
20,989 crore notice to Gameskraft. Other such notices include a Rs 1,243 crore notice sent by the Siliguri zonal unit and Rs 351 crore notice sent by Jaipur zone, said the source.
Tax experts noted that restricting access to websites can only have a limited impact. Ankur Gupta, Practice Leader (Indirect Tax), SW India, said, “The government is facing a challenge in nabbing not just offshore gaming entities but other OIDAR entities as well. This is not just a gaming industry issue. Meity is one option that they are exploring to ban content but these players can always change their IP address and remain accessible to Indian market.”
Online gaming attracts GST at the rate of 28% and officials are awaiting the next meeting of the GST Council where it is expected that the report of the Group of Ministers on online gaming, casinos and horse racing will be taken up.