Online Gaming Firms Face Risk of Tax Avoidance, Raising Concerns

Indian online gambling companies who shift overseas to escape a new 28% tax on the industry risk breaking the country's foreign currency regulations, according to Vivek Johri, head of the indirect taxation department, on Thursday.

In response to rumors that the tax would be implemented retroactively, he stated that New Delhi did not intend to do so.

According to an article published by REUTERS, the government imposed the charge on Tuesday's US$1.5 billion online gaming business, which has grown in popularity in recent years and attracted international investment.

The sector has warned of job losses and lower profitability, and experts have speculated that some may consider migrating to other nations.

It will be difficult for online gambling enterprises to relocate to avoid paying taxes on consumer profits, according to Johri, chairperson of the Central Board of Indirect Taxes and Customs (CBIC).

"It is going to be a risky proposition," he said. "It's actually not legal to remit money (to a foreign country) in the name of online gaming, so they are going to use some other (way), and that will further expose them to legal action."

He added that overseas online gaming businesses offering services in India will also have to follow laws being developed by India's electronics ministry, which may require local registration.

Despite the impact of the higher tax on playing charges, Johri believes that gamers who can afford to pay more and are addicted to such games would continue to participate.

He stated that the new tax would go into effect if India's parliament approved the measures in the coming weeks.