CBIC Seeks Information About Indian Users From Foreign Online Gaming Firms

The Central Board of Indirect Taxes and Customs (CBIC) has reportedly reached out to half a dozen online gaming firms based in Malta, the UK and Gibraltar to collect information on the number of users from India and the sums they have spent.

Tax officials sent letters to the gaming firms about six weeks ago, ET reported citing sources.

“They (tax officials) are trying to get a sense of the extent of money that is finding its way to offshore gaming companies. We don’t think these foreign firms keep separate records of users from various countries,” a source was quoted as saying in the report.

As per the law, importer of services have to pay GST on reverse charge basis. Reverse charge means the liability to pay GST rests with the recipient of the supply of goods or services instead of the supplier of such goods or services.

For import of online information and database access or retrieval services (OIDAR) by unregistered, non-taxable recipients, the supplier of service located outside India shall hold the responsibility for payment of GST.

When it comes to offshore gaming platforms, it becomes very difficult to track and identify residents remitting funds overseas due to the low value, high volume nature of transactions, the report said.

“Most are using international credit cards. Few may be using the money that was earlier sent abroad under the liberalised remittance scheme (LRS) and has been lying in a foreign bank account…No way would one get to know such fund transfers,” said a tax practitioner advising some of the companies.

As per an official quoted in the report, the authorities sent queries to some online gaming companies and have received a few responses. He also said that the lack of clarity on the GST rate for online gaming was making it easier for overseas gaming platforms to evade tax.

It must be noted that the CBIC is investigating gaming companies for alleged GST evasion of nearly INR 23,000 Cr, the government informed the Parliament recently.

“In so far as evasion of Goods and Services Tax (GST) is concerned, CBIC formations have initiated investigations against some gaming companies (including online gaming companies) located in India as well as abroad. The estimated evasion of GST by these companies works out of (to) INR 22,936 Cr, relating to (the) period April 2019 to Nov. 2022,” Minister of State (MoS) for Finance Pankaj Chaudhary said in a written reply in the Lok Sabha.

The Centre is currently working on taxation of online gaming platforms. A Group of Ministers (GoM) is reportedly expected to recommend imposition of a uniform GST of 28% on online gaming, while the government is also mulling a national framework for online gaming platforms.

According to a KPMG report, online gamers in India grew to about 400 Mn by mid-2020 from about 250 Mn in 2018, making the country the second-largest base of online gamers after China.