Online Money Gaming – A High-Risk Industry for Tax Evasion

In its annual report, the Directorate General of GST Intelligence (DGGI) has highlighted that entities offering online fantasy and sports gaming services were evading GST by misdeclaration of value and misclassification. Even after the legal clarity introduced by defining the term ‘Online money gaming’ in October 2023 and bringing it under ‘Specified actionable claims’ classifiable as goods under the GST law to be taxed at 28%, bringing the gaming entities under the tax net has been difficult. Firms are set up in offshore tax havens known for their opacity and keep on changing their URL/website/apps or using the dark web or VPN-based platforms to avoid tax compliance.

Hence, action was initiated against 118 domestic entities and Show Cause Notices were issued to 34 taxpayers. Furthermore, 658 Offshore entities were identified as non-registered/non-compliant entities, and an investigation was initiated against them. 167 URLs/websites were recommended for blocking.

Recommendations included setting up an Inter Department Committee comprising CBIC, CBDT, ED, MeitY, MCA, MIB, RBI, Department of Consumer Affairs, and the like, along with Industry bodies to ensure regulatory compliance, consumer protection and national security. In addition, creating awareness, promoting the use of legitimate platforms registered with MeitY or verified under the IT Rules, 2021 and entering into reciprocal arrangements with foreign governments for information sharing and tax enforcement are deemed to be the need of the hour.