Official Warns of Risk Involved in Indian Online Gaming Companies Moving to Avoid Taxation
On Thursday, Vivek Johri, the head of the indirect taxes’ department, warned that Indian online gaming companies may potentially breach the country’s foreign exchange laws if they proceed with their plans to relocate overseas in order to evade a newly imposed 28% tax on the sector.
New Delhi does not intend to introduce the tax retroactively, he said in response to speculation that it might do so.
The government on Tuesday announced a tax on the $1.5 billion online gaming industry, which has grown in popularity in recent years and attracted foreign investment.
The industry has warned of job losses and lower incomes, while analysts have said some may consider moving to other countries.
Converting online gaming companies to avoid paying taxes on the revenue they collect from customers will not be easy, Central Board of Indirect Taxes and Customs (CBIC) chairman Johri said.
“It’s going to be a risky proposition,” he said. “It’s not actually legal to send money (to a foreign country) in the name of online gambling, so they’re going to use some other (method) and that further exposes them to legal action.”
Foreign online gaming companies offering services in India must also comply with rules set by India’s Ministry of Electronics, which may require local registration, he said.
Despite the impact of higher taxation on gaming costs, players who can afford to pay more and are hooked on such games will continue to participate, Johri said.
He said the new tax will come into effect after India’s parliament ratifies the changes in the coming weeks.
