“The letters were sent about six weeks ago,” a person aware of the letters told ET. “They (tax officials) are trying to get a sense of the extent of money that is finding its way to offshore gaming companies. We don’t think these foreign firms keep separate records of users from various countries.”

Thanks to the low value, high volume nature of the transactions, it’s virtually impossible to track and identify residents remitting funds overseas to bet or play on online platforms. 

OIDAR services are sold over the internet and received by the recipient online without having any physical interface with the supplier. As per this definition, 18% GST is applicable on automated services involving minimum human intervention. Thus, services offered by a gaming or overseas cryptocurrency platform would attract GST.

However, the Indian tax department does not have the jurisdiction to shoot off a notice to an overseas platform. According to international law, such letters must be routed through the ministry of external affairs to its counterparts in that countries.

The current missives are thus in the form of a request from the tax department. A senior tax official accepted sending emails to overseas online companies, saying they are “queries” and not tax notices.

The official said lack of clarity regarding GST on online gaming and loopholes in the law make it easier for overseas gaming platforms to evade tax.

Evasion of GST by local online gaming companies is estimated at Rs 22,936 crore from April 2019 to November 2022, though officials suspect actual evasion could be much higher.

In June and July, information on GST was sent to a number of overseas gaming platforms to increase awareness and sensitise them on how they could be liable to pay tax in India. The recent set of letters aim at collecting more specific information.