DGGI will shake hands with foreign govts to crack whip on offshore gambling firms

The Directorate General of GST Intelligence has suggested that there is a need for an arrangement with foreign governments to tackle tax evasion in Online Information and Database Access or Retrieval (OIDAR) services like online gaming. Such arrangement with foreign government will also help blocking websites of notorious illegal gambling and betting websites.

Recently, the Directorate General of GST Intelligence (DGGI) has detected 6,084 cases of tax evasion totaling Rs 2.01 lakh crore in the financial year 2023-24. According to its annual report, real-money online gaming companies are the largest tax evaders, responsible for Rs 82,000 crore, which constitutes 41% of the total Rs 2 lakh crore evasion uncovered this year.

The DGGI Annual Report states that actions have been taken against 118 domestic online gaming companies, with Show Cause Notices issued to 34 taxpayers, involving tax amounts of Rs 1,10,531.91 crore. The GST department is investigating 658 offshore online gambling companies.

OIDAR services includes a wide array of services viz cloud services, digital content, online gaming, online advertising etc. When such services are provided by an offshore entity to a non-taxable recipient, the supplier becomes liable for obtaining registration and discharging GST on the same.

Currently, as many as 574 offshore entities providing OIDAR Services have registered themselves with the GST department, and annual revenue from this sector has increased from Rs 80 crore for the FY 2017-18 to Rs 2,675 crore for 2023-24 fiscal.

The Directorate General of GST Intelligence (DGGI) in its annual report noted that since the OIDAR service providers are located abroad it becomes a challenge in GST enforcement and hence the sector remains relatively untapped and holds tremendous revenue potential.

On dealing with such offshore suppliers, it has also dawned that several such suppliers are ignorant of the law, and upon conveying the legal position clearly, such suppliers agree to comply with the GST mandate, it said. These include the likes of Udemy Inc (USA), Canva Pty (Australia), OVH group (France), Blackboard (Netherlands) etc who registered themselves following efforts of DGGI and discharged significant tax liability.

"However, there are other entities that are non-cooperative and appear to intentionally avoid tax compliance. 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," the DGGI said.

The GST intelligence wing said that unique challenges in tax enforcement in this sector necessitate out-of-the-box interventions to plug revenue leakage.

The DGGI suggested steps like registering with the KODEX platform to receive the data/information in respect of offshore suppliers, as well as coordination with the Reserve Bank of India to obtain relevant data pertaining to forex transactions.