GST officers have discovered instances of tax evasion by offshore entities that provide online betting gambling services.

According to a source, tax officials have discovered that offshore entities are violating GST law by offering online betting gambling platforms to Indian residents through mobile apps, and they are currently working on finding solutions to address this type of tax evasion. The GST law mandates that all offshore entities offering services in India must register as suppliers of OIDAR (Online Information Database Access and Retrieval) services through the prescribed procedure.

The source has indicated that numerous offshore entities are offering online betting and gambling services in India but have not registered for GST, and as a result, they are not fulfilling their GST obligations.

The source informed PTI that while some foreign educational institutions that provide online courses in India have registered as OIDAR, those entities that offer online gaming, betting, and gambling platforms have not yet registered for GST. The source also mentioned that they are currently pursuing such cases and aim to ensure that these entities become compliant with GST regulations.

The online betting and gambling applications are accessible on the Google Play Store for users of Android phones and the App Store for iOS users, and they can be downloaded free of charge.

According to the source, the offshore entities offering online betting and gambling services in India are obligated to pay GST because they are collecting funds and providing services in the country. However, due to the fact that these entities do not have a permanent establishment or physical presence in India, it has become challenging to issue notices to them.

The source revealed that many of these companies often change their overseas bank accounts, making it difficult to track them down. Nevertheless, efforts are being made to ensure that such online betting and gambling platforms are subjected to taxation.

Moreover, the Enforcement Directorate can investigate activities related to betting and gambling, as per the Foreign Exchange Management Act (FEMA), which prohibits outward remittances for such purposes.

As per a written response provided by the Finance Ministry in December of last year to Parliament, GST officers are currently investigating instances of tax evasion by gaming companies, amounting to approximately Rs 23,000 crore, between the period of April 2019 and November 2022.

Moreover, in various cases related to cyber and crypto frauds, wherein online gaming was employed to divert the proceeds, the Enforcement Directorate has seized proceeds of crime exceeding Rs 1,000 crore. Furthermore, the Ministry of Electronics and IT (MeiTY) recently issued regulations for the online gaming sector, which explicitly prohibits all games that involve betting and wagering.

The online gaming sector will adopt a self-regulatory framework, and initially, three self-regulatory organizations (SROs) will be notified to approve games that conform to the country’s regulations. The source stated that once the MeiTY guidelines are implemented, the GST intelligence wing will devise its own system to address the issue of tax evasion.

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