India is moving to block popular offshore gambling sites, which have been doing booming business in the country.
iGaming Consultant Jaydeep Chakravartty writes that the Ministry of Information and Technology (MEITY) is taking action under the Information Technology Act, 2000 for alleged General Service Tax (GST) evasion and routing betting proceeds.
The move seems to be the result of a drawn-out procedure at the highest level.
According to earlier reports, the tax agency had asked MEITY to enact an IT Act ban on 25 offshore gambling sites.
Government warnings unheeded
The Union Ministry of Information and Broadcasting (I&B) issued a directive on Oct. 3rd, 2022 to digital news media and over-the-top platforms to refrain from carrying online betting advertisements.
As a result of the continuous presence of online betting advertisements on these sites, the government has now given a warning twice in the past five months, according to a government statement.
The ministry also raised the alarm about the existence of substitute news websites run by online gambling companies. The Union ministry announced that these platforms were also breaking the law.
Big business in offshore gambling
Offshore gambling sites have been doing booming business in India at a time when the Indian online skill gaming industry is facing significant challenges because of complicated government laws and guidelines, significant taxation issues and Google’s policy changes.
The offshore websites spend about INR 3,500 crore on ads and promotions, another 500 crore on celebrities and influencers to endorse their platforms. They spend a total of almost INR 4,000 crore ($500 million) each year, according to skill gaming organisation, AIGF. According to estimates, the Indian online gaming sector is losing at least $25–30 billion as a result of offshore gambling sites.
Earlier this month, we learned that the Enforcement Directorate, federal financial crime investigating agency, under the Foreign Exchange Management Act, 1999 (FEMA), is looking into offshore betting organisations for rerouting betting proceeds. Payments related to betting are prohibited by FEMA. The Central Government forbade Indian entities from funding international gambling projects in August.
- Jaydeep Chakravartty is an iGaming Consultant and has worked with Markor Technology (earlier Nektan PLC) as Vice President of Commercials. Before Markor, Jaydeep worked with Ingenuity Gaming since their foray into eGaming.
Domestic also in the crosshairs
The GST administration is also thought to be moving quickly against domestic online skill gaming companies for alleged GST fraud.
According to reports, more than 100 domestic online gaming enterprises may soon receive show-cause notices under the GST Act for allegedly avoiding GST by failing to pay tax at the rate of 28 percent on bet face values. Courts consider online games like fantasy sports, poker, and rummy to be skill games. Industry claims that the applicable GST rate is 18 percent based on legal precedents, however, the administration asserts that the tax rate is 28 percent and is comparable to gambling.
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