More than 600 Online Gaming Companies Are Found by DGGI in a Tax Evasion Investigation

Nitin Konde, Varun Bhardwaj

Dec 17, 2024 — 3 min read

DGGI Identifies 600+ Online Gaming Firms in Tax Evasion Probe

Pankaj Chaudhary, the Minister of State (MoS) for Finance, informed the Parliament that the Centre is investigating 642 offshore gaming, betting, and gambling organisations for possible tax fraud. Chaudhary further stated that the finance ministry is collaborating with the electronics and IT ministry (MeitY) to prohibit these websites in a written response submitted to the Lok Sabha.

"642 offshore companies that offer internet gambling, betting, and money gaming have been found so far for inquiry. According to the guidelines of Section 14A(3) of the IGST Act, 2017, MeitY has been notified to restrict the websites and URLs of the offshore online gaming companies that were discovered to be unresponsive and uncooperative during the investigation, Chaudhary stated. Selvaganapathi TM, a DMK MP, asked the minister if the Centre had any reciprocal agreements with other countries for exchanging information on tax avoidance by such organisations. The MoS Finance said that no such arrangements exist.

Expanding Nexus of Illegal Betting Platforms

The CEO of the industry group All India Gaming Federation (AIGF), Roland Landers, stated earlier this year that offshore unlawful betting platforms cost the national exchequer a staggering $2.5 billion in goods and services tax (GST) income annually. The current regulations mandate that all offshore online gaming businesses operating in the nation, regardless of whether they provide skill-based or chance-based games, establish a subsidiary in India or designate a representative to pay taxes on money received from clients. For real money gaming, all gaming platforms in the nation are required to pay a 28% GST on the full face value of bets.

28% GST Regime

Last year on October 1st, the 28% GST regime went into force. Many stakeholders and industry participants argued that the new regulation will negatively affect the domestic online gaming market and called for its reversal. The Centre, however, remained steadfast. Online gaming companies' collections increased 412% year over year (YoY) to INR 6,909 Cr in the six months following the new regime's implementation (October 2023 to March 2024).

The Central Board of Indirect Taxes & Customs, Department of Revenue, Ministry of Finance, is home to the former Directorate General of Central Excise Intelligence (DGCEI), now known as the Directorate General of GST Intelligence (DGGI). This top intelligence agency is tasked with gathering, compiling, and disseminating information about the evasion of the Goods and Services Tax (GST), which was implemented on July 1, 2017, and the duties of the Central Excise and Service Tax throughout India.

The Directorate General has a variety of responsibilities when it comes to combating the threat of duty avoidance. Through its nationwide intelligence network, it gathers intelligence, particularly in emerging areas of tax evasion, and disseminates it by sending out Modus Operandi Circulars and Alert Circulars to advise field formations of the most recent developments in duty avoidance. When it is deemed essential, this Directorate General conducts operations to uncover GST, Central Excise Duty, and Service Tax evasion, either alone or in coordination with field forces.