On November 3, the Enforcement Directorate, probing the Mahadev app for alleged money laundering activities, said that according to fresh evidence following a search operation on November 2, it came to light that regular payments were made in the past and so far around Rs 508 crore has been paid by Mahadev App Promoters to Chhattisgarh Chief Minister Bhupesh Baghel.
The ED received credible inputs and conducted successful search operations on November 2 in Chhattisgarh in which Rs 5.39 crore in cash was intercepted in the poll-bound state.
Notably, under the Constitution of India, betting and gambling are under the purview of state governments.
The ED is investigating the Mahadev Book Online Betting App syndicate in which the promoters of this betting syndicate are based abroad and remotely running thousands of panels across India with the help of their friends and associates who are mainly from Chhattisgarh and have earned thousands of crore of proceeds of crime.
The ED has already arrested four accused persons and seized proceeds of crime worth more than Rs 450 crore. The federal agency has also filed a prosecution complaint against 14 accused persons.
What is the Mahadev App and the money laundering scandal associated with it
The Mahadev app is an online betting platform that operates illegally and launders the money it receives from users who are not located in India. The Mahadev betting application was created by four people including key accused Saurabh Chandrakar and Ravi Uppal from Madhya Pradesh and it gradually replaced at least 10 similar illicit betting apps that were being used all over the country. Lotus 365 and ReddyAnna are a couple of the applications that were once part of the Mahadev betting fold.
Mahadev Online Book (MOB) has networked from its UAE headquarters to India, Sri Lanka, Nepal and Pakistan.
According to the ED, the app makes money by franchising “Panel/Branches” to its known associates at a profit margin of 70-30 per cent. It allegedly creates IDs, enrols new users, and launders money through a tiered network of Benami bank accounts utilizing the online book betting program.
The Mahadev App scam is thought to have involved a huge sum of money, estimated to be approximately Rs 5,000 crore. The ED during the probe revealed that Saurabh Chandrakar and Ravi Uppal established around 4,000-panel operators in India for betting, with each panel having 200 customers who place bets. With this, Chandrakar and Uppal had been making Rs 200 crore daily.
Some major participants in the money laundering operations have been identified by the ED, most notably Kolkata-based Vikash Chhaparia.
The Mahadev app grabbed headlines after the ED summoned Bollywood A-listers like Ranbir Kapoor, Shraddha Kapoor, Huma Qureshi, and Hina Khan, who along with several Bollywood personalities attended and performed at the wedding ceremony of Saurabh Chandrakar, one of the founders of the Mahadev Betting app.
According to sources, the agency learnt about many celebrities endorsing these betting entities and doing promotional work in return for hefty fees.
As of now, as many as 34 Bollywood celebrities including actors, singers, dancers etc. have come under the Enforcement Directorate ED scanner in connection with the scam. Raftaar, Sonu Sood, Hardy Sandhu, Sonakshi Sinha, Malaika Arora and Amit Trivedi some of the names.
Rapper Badshah quizzed for promoting ‘Fairplay’ betting app, a subsidiary app of D-company linked Mahadev App
On 30th October, the Cyber Cell of Maharashtra Police called rapper Badshah for interrogation in connection with the illegal screening of the Indian Premier League (IPL) cricket tournament on an online betting app named ‘FairPlay’ he promoted. Subsequently, he appeared at the Maharashtra Cyber office in Mumbai.
Notably, the Fairplay app which has come under the scanner is a subsidiary app of the Mahadev app, promoters of which have links with Dawood Ibrahim’s D-company and are being probed in a money laundering case by the Enforcement Directorate.
The recent investigation into the Mahadev Betting app and its subsidiary apps for alleged money laundering activities has opened up Pandora’s box and brought attention to how, over the years, many such offshore gaming and betting businesses have profited millions of rupees through money laundering and tax law violations.
How do these offshore apps function
The investigation into the Mahadev Betting App scam once again brought tax evasion by offshore betting and gambling platforms under the scrutiny of the watchdogs.
Broadly, these illegal offshore gambling companies, use three methods to interact with potential customers:
- 1. They draw the attention of unsuspecting consumers through advertisements.
- 2. They use dubious financial channels to huge illicit sums of money from consumers.
- 3. Finally, they circumvent government monitoring through a huge number of mirror websites.
How do these offshore gambling platforms evade taxes
According to the source, there are many offshore entities providing platforms for online betting and gambling in the country but are not GST-registered and hence are not paying the required GST.
Let us understand how these offshore gambling companies have been evading paying taxes and its impact on the Indian economy.
Majorly, the platforms evading GST are offshore and not registered under GST law. Despite not being registered under the relevant legislation, the gambling apps are available for free download to customers on Google Play and App Store.
Since these offshore betting and gambling platforms are operating illegally, none of the powerful platforms, that receive thousands of crores of rupees in deposits each month from Indian citizens, pay taxes.
This obviously, has a severe adverse impact on the Indian economy.
How is the government losing money?
The online gaming industry across India was valued at around 135 billion Indian rupees in the year 2022, however, it is estimated that offshore gambling sites such as Dafabet, Betway, Bet365, Parimatch, Fairplay and 1xbet are making the Indian online gaming industry poorer by at least $25-30 billion.
According to a written reply given by the Finance Ministry in Parliament in December last year, GST officers are investigating tax evasion of about Rs 23,000 crore by gaming companies between April 2019 and November 2022.
Notably, right now, there are significant differences between the GST laws for “games of skill” and “games of chance” (betting or gambling). While games of chance are subject to a 28 per cent GST on the contest entry fee, games of skill are subject to an 18 per cent GST on the platform cost.
This means such apps are expected to generate revenue to the tune of $400-500 million, but a significant portion of this amount never lands in the public exchequer’s account.
According to the Tax Department, while these companies are required to pay GST for their domestic operations and transactions, it is difficult to issue notices to them because they lack an established presence or physical footprint in India.
The majority of offshore betting companies are based in tax havens like Gibraltar, Belize, Curacao, Malta, and the Isle of Man. Despite having ties to India, the owners are based there.
Furthermore, it has been observed that many of these organisations frequently change their offshore bank accounts, making it difficult to track and identify them.
Offshore gambling giants lure celebrities by offering huge compensation
Even though fake marketing for these offshore gambling organizations has previously been outlawed by the Indian government, these companies nevertheless exploit sports and entertainment media to advertise their brands.
According to some media sources, these websites bring in around Rs 5,000 crore or 50 billion each month in India. With that kind of money, they can easily court larger broadcasters and reserve their spots on TV, digital, and over-the-top (OTT) platforms—albeit through proxy means. It is even easier to rope in celebrities, actors and social media influencers to endorse their brands,
These offshore gambling platforms have, reportedly, launched ‘news’ websites, partnered with organizations as sponsors, resulting in the placement of their insignia on team jerseys, and deluged popular websites with clickable banners.
In fact, due to their continued appearance in advertising for betting websites and apps, as well as their surrogate news sites, over a dozen celebrities, including top actors, cricket players, and other macro and mid-tier influencers, may be in breach of a government recommendation.
In October 2022, the Ministry of Information and Broadcasting forbade the use of surrogates and online betting advertisements on television and internet platforms. Despite the ministry’s advisory naming Fairplay, PariMatch, Betway, Wolf 777 and 1xBet, many popular influencers, actors and celebrities continued appearing in online gambling ad campaigns for Parimatch News and Betway.
In fact, in a video posted on Instagram on November 9, 2022, online betting site Fairplay continued with its ads featuring Ranbir Kapoor, Kiara Advani, Sunil Narine, Mithali Raj, Saina Nehwal, Mary Kom and Eoin Morgan.
Rannvijay Singh Singha and Kevin Pietersen are advertising on Betway’s homepage.
Actor Esha Gupta was signed on as the online betting app Khelraja’s brand ambassador in January this year.
100 online gaming apps on DGGI radar for Rs 1 lakh-crore tax evasion
In 2017-18, after the change in the tax regime and introduction of GST, the investigation into offshore gaming platforms regained steam, redirecting the government’s attention to the massive tax fraud being carried out with impunity by several such offshore betting apps.
In October this year, as many as 100 online gaming applications operating in India have been under the scanner of the Directorate General of Goods and Services Tax Intelligence (DGGI) for alleged tax evasion to the tune of around Rs 1 lakh crore.
Dream11, the unicorn fantasy sports app, has been issued two show cause notices for alleged tax evasion amounting to Rs 28,000 crore, the highest indirect tax demand notice to date. The notices were served in September – one each by the state and Central GST departments.
Similarly, in April, the Directorate General of GST Intelligence (DGGI) sent notices to as many as 38 such platforms for allegedly laundering money and syphoning off taxes.
These sites have been investigated several times for tax evasion. The Enforcement Directorate (ED) also recovered Rs 212.91 crore in connection with money laundering investigations involving online gaming platforms through December 2022.
The government, on its part, is trying to detect and plug tax evasion by offshore entities providing online betting and gambling, costing the exchequer crores of rupees. However, if broadcasters and product advertisers refrain from taking part in these campaigns and cease providing such offshore illicit websites with any advertising real estate, at the very least, the attempts to entice customers by these offshore betting giants can be put an end to.
