technology

I-T lens on Rs 10,000 crore tax evasion by etailers; ED slaps show cause notice on Byju’s


The income tax department has uncovered tax evasion of around Rs 10,000 crore over three years by online retailers using social media platforms like Instagram and Facebook. This and more in today’s ETtech Morning Dispatch.

Also in the letter:
■ Esports casters turning commentary into a profession
■ Govt may take up deepfake SOPs with companies
■ $125 million hit to TCS’ Q3 earnings over US lawsuit


I-T department detects Rs 10,000 crore tax evasion by etailers

tax-evasion

The income tax department is said to have detected tax evasion of nearly Rs 10,000 crore over a three-year period by online retailers selling goods via social media platforms such as Instagram and Facebook. The department has sent intimation notices to 45 such pan-India brands, with more to follow. They were either not paying tax or had underreported it, ET has learnt.

Quote, unquote: “They are just selling via Instagram with just a small shop and warehouses and had turnover of Rs 110 crore, while they had filed the return declaring income of Rs 2 crore,” a senior official said. The list includes some prominent retailers that use social media to reach a larger audience, said the official without disclosing names.

High Sales, Low Tax: India has over 330 million active Instagram users and over 380 million Facebook users. After Covid, there was a surge in the number of retailers selling goods via these platforms that have high user engagement. Officials said these 45 entities have a robust turnover. The official said that three Mumbai-based sari e-tailers came on the tax department’s radar after they sponsored a star-studded fashion show.

Influencers under scrutiny: In June, ET had reported that the income tax department had sent notices to many social media influencers, for paying zero or “substantially low” tax despite receiving hefty fees from companies whose products they promoted through their posts.


ED issues show cause notice to Byju’s for Rs 9,362 crore forex violation

Byjus

Byju Raveendran, founder and CEO, Think & Learn

The Enforcement Directorate (ED) on Tuesday confirmed that it has issued show cause notices to Byju’s parent Think & Learn and its founder and CEO Byju Raveendran for violations, amounting to Rs 9,362.35 crore, under the Foreign Exchange Management Act (FEMA).

On Tuesday morning, ET, citing sources, had reported that the ED had found alleged forex violations to the tune of Rs 9,000 crore by edtech giant Byju’s.

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Company’s denial: In response to ET’s request for comment on the matter, a spokesperson said the company “unequivocally denies media reports that insinuate it has received any notice from the Enforcement Directorate.”

Byju’s founder and chief executive Byju Raveendran told shareholders on Tuesday that the firm is fully compliant with Foreign Exchange Management Act (FEMA) regulations. He also dismissed reports on the ED’s finding.

CEO’s letter: “…which (an email) highlights the results of a comprehensive due diligence conducted on Byju’s. The email confirms that the due diligence found no FEMA violations at Byju’s,” read his note to the shareholders.

Raveendran also said the firm “has maintained a cooperative stance with the ED throughout their inquiries and satisfactorily answered all their queries, both verbally and on record.”

What the ED found:
The ED found Byju’s to be under violations to the tune of Rs. 9,362.35 crore, under section 16 of FEMA. It also alleged that Think & Learn Private Limited and Raveendran violated the Act by failing to submit import documents for advance remittances outside India, delaying the realization of export proceeds, filing FDI-related documents late, neglecting to file documents for remittances abroad, and failing to allocate shares against received FDI.

On the ED radar: In April this year, ED conducted searches on several premises linked to Byju’s in a probe into alleged FEMA violations relating to investments and transfer of funds abroad by the edtech startup.


How esports casters are turning commentary into a lucrative profession

Esports event

The recently-concluded cricket World Cup experience was inseparable from its elite panel of TV commentators including Harsha Bhogle, Ravi Shastri and others. A similar trend has been emerging in esports. The rapid spread and burgeoning popularity of the discipline in India is seeing the rise of a cohort of charismatic commentators who are getting paid handsomely for their efforts.

Who are they? Esports casters like Ocean Sharma, Varun John, Sudhen Wahengbam, Kaavya Karthikeyan and many others are being well rewarded as hosts of tournaments such as BGMI, Valorant, CS:GO, and are even making a mark internationally.

More details: Besides broadcasting for Star Sports, Sony Sports Network, Jio Cinema, Krafton, Riot Games and others, they are presenting at upscale ground events sponsored by Nodwin, Red Bull and Skyesports that pull in crowds of more than 40,000 over a three-day period.

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Raking in the moolah: Experts said some popular esports casters are making more than even the players themselves at Rs 2-3 lakh per day.

Demand is high: With the increasing size of both online and offline tournaments, the demand for skilled casters has surged, said Lokesh Suji, director, Esports Federation of India.

Quote, unquote: “In the Indian context, many casters operate on a freelance model, receiving compensation on an event-project basis,” said Parth Chadha, CEO and cofounder of “fan engagement platform” STAN. “During busy months, they can earn up to 3 lakh, surpassing the average income of players and in some months have no income at all. This highlights the financial viability and flexibility of the freelance model for casters.”


Govt may take up deepfake SOPs with social media companies

Social Media

The government is scheduled to meet with senior executives from social media and other internet intermediaries on Thursday to address the issue of widespread deepfakes on the internet and explore preventive measures, according to senior government officials.

Details: The meeting is expected to include discussions on establishing a standard operating procedure (SOP) outlining guidelines for companies regarding deepfake content, an official said.

“Deepfake is classified as impersonation and misinformation under Rule 3(2)(b) of the IT Rules and therefore has detailed provisions on the action to be taken. For the time being, we will come out with a SOP for intermediaries on the action to be taken. The DIA (Digital India Act) may contain detailed provisions on dealing with newer technologies such as deepfake,” the official said.

Catch up quick: On Saturday, Union IT minister Ashwini Vaishnaw said his ministry would meet social media and internet intermediaries to brainstorm ways in which the spread of deepfake photos and videos could be contained.

“We will make sure that the platforms make adequate efforts to clean up against such content. The regulations are already there. The immunity which the platforms have, which is the safe harbour clause, which is there in the IT Act, will not be applicable if the platforms do not make adequate efforts,” Vaishnaw said.


TCS to take $125 million hit to Q3 earnings over US lawsuit

TCS employees

The US Supreme Court has dismissed Tata Consultancy Services’ (TCS) appeal related to a $140-million penalty in a trade secret lawsuit by Epic Systems. TCS will set aside $125 million in Q3 of this fiscal year ending December 2023 to address the penalty.

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Lawsuit details: Dating back to 2014, the lawsuit alleged that TCS employees had pilfered 6,000 pieces of crucial data, including system development information from Epic Systems, by creating a fraudulent user account.

The initial punitive damages award was $700 million, subsequently reduced to $280 million. In August 2021, a US Court of Appeals deemed the $280 million award “constitutionally excessive” and further reduced it to $140 million in 2022.

Company’s statement: “…we hereby inform you that in the Epic Systems Corporation matter, the United States Supreme Court on November 20, 2023, rejected the company’s petition to file an appeal against the orders passed by the US Court of Appeals, 7th Circuit, which confirmed the punitive damages award of $140 million passed by the district court of Wisconsin,” TCS said in a statement.


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