GST’s research arm, DGGI, has suggested reciprocal arrangements with foreign governments to share information and adopt enforcement measures, as well as blocking of websites to prevent tax evasion in OIDAR services such as e-gaming, online education and advertising.
The move has become necessary because the DGGI has learned that there are entities, including online casinos, that are based in tax havens and also others that operate through offshore VPNs and cloud-based platforms. These entities are uncooperative and appear to intentionally evade compliance with tax obligations, so an exchange of information with law enforcement agencies globally would help to crack down on any evasion.
Online information access or retrieval and database services (OIDAR) are those that are provided through the Internet or an electronic network and whose provision is essentially impossible without information technology.
It includes a wide range of services, namely, cloud services, digital content, online gaming, online advertising, etc. When an offshore entity provides such services to a non-taxable recipient, the provider becomes responsible for obtaining registration and paying GST on the same.
Currently, as many as 574 offshore entities providing OIDAR services have registered with the GST department, and the annual revenue of this sector has increased from Rs 80 crore for fiscal year 2017-18 to Rs 2,675 crore for fiscal year 2023-24.
The Directorate General of GST Intelligence (DGGI) in its annual report noted that since OIDAR service providers are located abroad, enforcement of GST becomes a challenge and hence the sector remains relatively untapped and has huge revenue potential.
While dealing with such offshore suppliers, it has also been found that several of them are ignoring the law and by clearly conveying the legal position to them, such suppliers agree to comply with the GST mandate, he said.
These include Udemy Inc (USA), Canva Pty (Australia), OVH group (France), Blackboard (Netherlands), etc., which were registered thanks to the efforts of the DGGI and fulfilled an important tax obligation.
“However, there are other entities that are uncooperative and appear to intentionally avoid compliance with tax obligations. These include several online casinos based in tax havens such as Malta, Cyprus, Curacao, British Virgin Islands, etc. There are also other entities that are difficult to reach because they operate through VPNs or cloud-based platforms,” the DGGI stated.
The GST intelligence wing said the unique challenges in tax enforcement in this sector require innovative interventions to plug revenue leakages.
The DGGI suggested measures such as registering on the KODEX platform to receive data/information regarding offshore vendors as well as coordinating with the Reserve Bank of India to obtain relevant data pertaining to foreign exchange transactions for the purpose code falling under Group 8 (i.e. Computer and Information Services) of the RBI Purpose Codes for Reporting Foreign Exchange Transactions to deal with evasion in the sector.
“…entering into reciprocal agreements with foreign governments for exchange of information and taxation for OIDAR services and allowing blocking of websites of non-compliant service providers are some of the suggested interventions,” the report titled ‘Trends in GST Evasion 2023-24’ states.
(Only the headline and image of this report may have been reworked by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
First published: September 16, 2024 | 11:08 PM IS
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