INDIAN GAMING
Paytm faces ED scrutiny amid allegations of illegal betting and money laundering
The Directorate of Enforcement (ED) has launched an extensive investigation into Paytm since 2021, uncovering potential connections to money laundering and illicit betting, according to informed sources. Economic Times reported that Revenue Secretary Sanjay Malhotra announced on Saturday that the ED would delve deeper into Paytm Payments Bank if new allegations of fund siphoning emerge. The ED, alongside the Directorate of GST
Intelligence (DGGI), has raised concerns with the government about the exploitation of Indian payment gateways for trade-based money laundering (TBML), illegal betting, and the channelling of funds to crypto wallets. Notably, Paytm transactions have come under scrutiny, including those related to cryptocurrency mining investments. The Reserve Bank of India (RBI) took regulatory
action on January 31, directing Paytm Payments Bank to cease basic payment services across various platforms, including the Unified Payments
Interface (UPI), due to regulatory non-compliance. Additionally, the RBI prohibited the bank from providing banking services, such as accepting deposits and processing payments. Despite the ED not formally charging Paytm in
money laundering cases, the company has faced office searches, document requests, frozen merchant accounts, and executive interrogations related to investigations into 365 fintech companies linked to Chinese nationals. Recent attention has also focused on Paytm transactions in the Mahadev Online Book illegal betting case, where the accused orchestrated an illicit betting scam exceeding Rs 5,500 crore. In this case, Paytm emerged as one of the payment gateways employed by the accused to conduct transactions with clients involved in the betting operations. The ED found that the bets were exclusively accepted through the Unified Payments Interface (UPI) to project a more credible image. Fake UPI accounts were created through fraudulent Know Your Customer (KYC) processes or enticement-based commissions, with over eight
lakh such fake accounts identified by the investigative panel. Paytm has denied ED scrutiny over money
laundering, distancing founder Vijay Shekhar Sharma and parent company One 97 Communications Ltd (OCL) from any investigation. Paytm insists that it has not been the subject of an ED investigation, although occasional inquiries involving merchants on its platforms have been addressed with full cooperation. As Paytm faces increased scrutiny,
regulatory authorities are stressing the need for robust internal systems and compliance with guidelines to prevent misuse of payment gateways. With the Reserve Bank of India (RBI) ordering Paytm Payments Bank to cease various banking services due to persistent non-compliance, Paytm finds itself at the centre of a complex web of investigations, requiring thorough examination to address the allegations and concerns raised by regulatory bodies.
GST review assessment for online gaming to be considered after March, states Revenue Secretary Sanjay Malhotra
The GST Council is set to review the 28 percent Goods and Services Tax (GST) on full face value on online gaming only after March 31, Revenue Secretary Sanjay Malhotra said. The assessment of the GST on online gaming is
not slated for discussion in the upcoming council meeting but is instead planned for the subsequent session. As the six-month period concludes on March 31, the possibility of addressing the GST on online gaming during the meeting following that timeframe is being considered, stated Malhotra in an interview with Moneycontrol. Malhotra emphasized that a review does not
necessarily imply a change in rates; rather, it is a means to assess the current situation and determine if any adjustments are required. The GST Council in its meetings in July and
August 2023 had decided to recommend the levy of 28% GST on full face value of bets placed through money gaming platforms and horse racing and casinos which came into effect on 1 October. The tax department reported viewing the change as only clarificatory in nature and 28% tax on full value of wager amount is applicable since July 2017.
“Industry is already aware of our stand. They
want to pay at 18% on the gross gaming revenue (GGR) or the platform fee. The law already existed that they need to pay 28% GST on each bet placed, being a game of chance,” a top Government official was quoted as saying by TNIE. Several gaming companies have taken a
stance against the GST notices, following heavy losses and decreased revenues, including Delta Corp, which called the notices ‘arbitrary’. The revenue secretary expressed
satisfaction on the new regime and said the revenue potential was untapped until the new regime. GST collection from online gaming in Nov-Jan period touched rupees 3,470 crore. During an interview on Feb 1, 2024, the
revenue secretary said online money gaming platforms are paying Rs. 1200 crores per month GST on an average from 1st October, 2023 since the new GST regime of 28% on deposits was introduced compared to Rs. 200 crores per month on an average that they were paying before the new regime came in (18% on platform fees).
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www.g2g.news MARCH 2024 27
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