Indian online gaming firms relocating to avoid tax will be 'risky', official says

NEW DELHI, July 13 (Reuters) - Indian online gaming firms planning to relocate overseas to avoid a new 28% tax on the sector run the risk of violating the countrys foreign exchange laws, Vivek Johri, head of the indirect taxes department, said on Thursday.

New Delhi does not plan to implement the tax retrospectively, he said, in response to speculation it could do so.

The government on Tuesday announced the levy on the $1.5 billion online gaming industry, which has surged in popularity in recent years, attracting foreign investment.

The industry has warned of job losses and reduced earnings, while analysts have said some may explore relocating to other countries.

Online gaming companies relocating to avoid paying tax on the revenues they collect from customers is not going be easy, Johri, chairman of Central Board of Indirect Taxes and Customs (CBIC), said.

\“It is going to be a risky proposition,\” he said. \“Its 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.\”

Overseas online gaming companies providing services in India will also have to abide by the regulations being formulated by Indias electronics ministry, which may mandate local registration, he said.

Despite the impact of the higher tax on playing costs, gamers who can afford to pay more and are hooked on such games will continue to participate, Johri said.

He said the new tax would come into force after Indias parliament ratifies the changes in coming weeks.