Govt tightens noose around foreign gaming firms; startups take Google to court

This and more in today’s ETtech Top 5.

Also in this letter:
■ Former Twitter CXOs sue Elon Musk
■ TCS Q4FY23 earnings preview
■ Apple’s Mumbai store to be launched on April 18

Foreign online gaming firms under scanner for tax evasion

The Directorate General of GST Intelligence (DGGI) has cracked down on Cyprus, Mauritius and Cayman Islands-based entities offering online gambling and betting, with some of them said to be posing as fantasy game platforms.

Details: These companies are not registered in India and, initial scrutiny suggests, were helping many high-net-worth individuals (HNIs), including some celebrities and social media influencers, launder money abroad, people aware of the development told us.

So far, tax officials have identified 38 such portals offering services in India but that have not paid any goods and services tax (GST).

Also read | Group of ministers likely to propose 18% GST for games of skill, 28% for chance

The extent of tax evasion is estimated to be around Rs 12,000 crore from April 2019 to November 2022. The tax department has issued notices to these companies and the investigation is ongoing.

‘Distorting the market’: The online gaming market has been an area of concern for both policymakers and the domestic industry, which feels that these offshore-based entities are distorting the market.

“While the domestic industry is largely self-regulated, it still loses a substantial amount of revenue to these overseas players,” said Dibyojyoti Mainak, head of legal and policy at Mobile Premier League (MPL).

Catch-up quick: Minister of State for Finance Pankaj Chaudhary had in December last year said that the Central Board of Indirect Taxes and Customs (CBIC) has initiated investigations against some Indian as well as foreign gaming companies. “The estimated evasion of GST by these companies works out of Rs 22,936 crore, relating to the period April 2019 to November 2022,” he said.

Indian startups move court to stop Google’s new in-app billing system

The Alliance of Digital India Foundation (ADIF), a group representing Indian startups such as MapmyIndia, Truly Madly, Paytm, Matrimony has filed a case in the Delhi High Court against the Competition Commission of India (CCI) and Google, alleging that the antitrust regulator’s “inaction” on the tech company’s user choice billing (UCB) system, is resulting in Google engaging in antitrust conduct, sources told ET.

CCI ‘failed’ to take action: In its petition, reviewed by ET, ADIF has alleged that CCI has “failed to take action on the multiple applications” made by the group. These included how Google is “taking actions which are in gross violation and intentional non-compliance” of the competition panel’s October order asking Google to cut back on some of its practices. News agency Reuters reported the development first on Tuesday.

Background: ET reported last week that ADIF had made a representation to the CCI in which it has urged the regulator to “look into these abusive dominance practices of Google on an urgent basis”. Under the new system proposed by Google, which will become effective from April 26, app developers need to pay a commission of 11-26% to the US-based tech giant.

ADIF’s plea: ADIF has sought the court’s intervention, and has urged that an interim order “prohibiting implementation of UCB” be issued. The new billing system will become effective from April 26. Delhi High Court will hear the case on Wednesday.

Other concerns: The ADIF has alleged that the UCB is “cloaked as another version” of Google’s older billing system for in-app purchases, “which projects the hoax of giving liberty to app developers to opt for third party payment processors”.

Ex-CEO Parag Agrawal, two other former executives sue Twitter

Three former Twitter executives — Parag Agrawal, who was CEO; Ned Segal, who was CFO; and Vijaya Gadde, who was head of public policy — have sued the microblogging platform seeking to be reimbursed for costs of litigation, investigations, and congressional inquiries related to their former jobs.

Elon Musk fired the three executives shortly after he took over Twitter in October last year.

Why the case? The court filing outlined numerous expenses related to inquiries by the US Securities and Exchange Commission (SEC) and the Department of Justice (DOJ), but does not include details on the nature of the investigations or whether they are still ongoing.

Agrawal and the two others claim Twitter owes them more than $1 million, and that the firm is legally bound to pay them.

Legal costs: Agrawal and Segal provided testimony to the SEC last year and “have continued to engage with federal authorities,” according to court documents. Gadde, too, was called on to take part in a US congressional hearing about big tech and free speech following Musk’s release late last year of “Twitter Files” related to the site’s content moderation policies.

Also read | A series of chats that possibly sealed the fate of Twitter’s ex-CEO Parag Agrawal

Heavy fine in Germany: Twitter might be in for some trouble in Germany as well, for failing to take down hateful content on the platform, exposing the company to multi-million-euro fines. According to a report in the tech publication Techcrunch, there are about 600 such cases against Twitter, each of which can lead to a fine of up to €50 million.

Earnings preview: TCS Q4 revenue growth to moderate, say brokerages

IT bellwether Tata Consultancy Services (TCS) will kick off the March quarter (Q4) earnings season on Wednesday with investors watching out for the software exporter’s commentary on the growth outlook amid global macro headwinds.

Brokerages’ take: “We expect Q4FY23 revenue growth to moderate to 1% quarter-on-quarter in constant currency terms due to the macroeconomic slowdown leading to delays in revenue conversion and sales cycles,” Jefferies analyst Akshat Agarwal said.

“Though Indian IT services firms do not have meaningful exposure to the affected US regional banks, fears of a banking crisis could impact near-term IT spending by banks and will be the key monitorable during the Q4 management commentary,” Motilal Oswal said.

Q3 earnings: TCS reported 11% on-year growth in net profit for Q3FY23. An ET poll of analysts had expected the Mumbai-headquartered company’s profits to expand by 12.5%. The company also saw a reduction in its total workforce for the first time in ten quarters as it slowed down fresh hiring.

Revenue stood at Rs 58,229 crore, up 19.1% year on year, led by demand for cloud solutions, and surpassing analyst estimates. Meanwhile, net profit stood at Rs 10,846 crore rising from Rs 9,769 crore a year back. On a sequential basis, profit grew 3.9% and revenue was up 5.2%.

Tweet of the day

Apple’s first retail store in Mumbai to open on April 18, Delhi launch on April 20

Apple on Tuesday announced that its first-ever retail store in India will open on April 18 at the Jio World Drive Mall in Mumbai. A second one, at the Select Citywalk Mall in Saket, Delhi, will be launched on April 20.

Quote unquote: “These new retail locations mark a significant expansion in India that will offer great new ways to browse, discover, and buy Apple products with exceptional service and experiences for customers,” Apple said in a press note.

No-go zone for rivals: We had previously reported that the iPhone maker has signed a lease agreement that prohibits nearly two dozen technology, electronics, and ecommerce brands from having any kind of presence near its Mumbai store.

Amazon, Facebook, Google, LG, Microsoft, Sony, Twitter, Bose, Dell, Devialet, Foxconn, Garmin, Hitachi, HP, HTC, IBM, Intel, Lenovo, Nest, Panasonic, and Toshiba are to be kept out of its “exclusive zone”. This will include stores, hoardings, and advertisements.

Tim Cook visit likely: Sources told us earlier that Apple chief executive Tim Cook is likely to visit India for the launch of the Mumbai store.

Cook will also discuss strategic issues such as manufacturing expansion and exports from India with key ministers. If the visit does take place, it could possibly include a meeting with Prime Minister Narendra Modi, sources told us.

Today’s ETtech Top 5 newsletter was curated by Gaurab Dasgupta in New Delhi and Megha Mishra in Mumbai. Graphics and illustrations by Rahul Awasthi.