Offshore betting firms set to be blocked, shell entities under tax department scanner: Report

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25 offshore betting sites are set to be blocked by Ministry of Electronics & Information Technology (MEITY) soon for GST evasion & FEMA violation, reported ET Now. The offshore betting companies operate under shell companies to route revenues and therefore Enforcement Directorate, the investigative body under Foreign Exchange Management Act, 1999 (FEMA) may also get involved in the investigation according to reports. FEMA doesn’t permit remittances in relation to betting.

While action against offshore betting firms is a welcome move, the GST department is moving at fast pace against domestic online skill gaming entities for alleged GST evasion.

Last month, the GST Intelligence wing has served a demand notice of over INR 21,000 crores to Gameskraft. Reports now indicate that over 100 domestic online gaming companies likely to get showcause notice under GST Act for allegedly evading GST by not paying tax at 28% on face value of bets. Online games like Fantasy Sports, Poker, and Rummy are held to be skill games by Courts. Industry uses the judicial precedents to claim applicable GST rate at 18% while department claims the tax rate to be at 28% on par with gambling.

Betting and gambling is illegal in India including online offshore websites. The Ministry of Information and Broadcasting (MIB) has issued advisories to broadcasters and digital media twice this year – once in June and second time earlier this month.

In the second advisory, MIB even identified advertisements in the media sector in violation of laws with blatant disregard to first notification. The second notice signalled the seriousness of the government to curb rampant online gambling activity.

Top broadcasters Star, Sony discontinued promotions of surrogate betting firms after the  recent notification. Revocation of broadcast license is a big threat that the broadcasters could face for promoting gambling websites.

While broadcasters are under the scanner of MIB, MEITY and Finance Ministry are reportedly acting to curb the menace of the offshore betting firms by taking action under tax and Information Technology laws.