The Directorate General of GST Intelligence (DGGI) has uncovered the highest-ever goods and services tax (GST) evasion by the online money gaming industry, amounting to ₹81,875 crore for FY24 across 78 cases.
In its latest annual report, the DGGI revealed a record 6,084 cases of tax evasion in 2023-24, involving ₹2.01 trillion in GST, which is double the ₹1.01 trillion identified in FY23 across 4,872 cases.
The report indicated that 46 per cent of the evasion cases involved non-payment of taxes through clandestine supply and undervaluation, 20 per cent were related to fraudulent Input Tax Credit (ITC) claims, and 19 per cent pertained to improper ITC claims or failure to reverse them.
Following online gaming, the BFSI sector ranked second for GST evasion, with ₹18,961 crore across 171 cases. Other notable sectors included works contract services (343 cases, ₹2,846 crore) and pharmaceuticals (22 cases, ₹40 crore).
Additionally, 1,976 cases were detected in the iron, copper, scrap, and alloys sectors, involving ₹16,806 crore, while the pan masala, tobacco, cigarettes, and bidi industries recorded ₹5,794 crore in evasion across 212 cases.
Other sectors with significant evasion included plywood, timber, and paper (238 cases, ₹1,196 crore), electronic items (23 cases, ₹1,165 crore), and marble, granite, and tiles (235 cases, ₹315 crore).
The DGGI report recommended forming an inter-departmental committee, including representatives from the Enforcement Directorate, Reserve Bank of India, tax authorities, and consumer affairs departments, to address the proliferation of online gaming platforms and ensure regulatory compliance.
“A multi-pronged approach is essential to address this sector. An inter-department committee should be established to develop comprehensive strategies and regulations to combat the proliferation of such platforms, ensuring regulatory compliance, consumer protection, and national security,” the DGGI said in its report released on Saturday.
The GST intelligence wing has initiated action against 118 domestic online gaming entities and issued show-cause notices to 34 taxpayers for failing to pay GST at the applicable 28 per cent rate, involving a tax amount of ₹1.1 trillion.
Additionally, 658 offshore entities have been identified as non-registered or non-compliant and are under investigation, while 167 websites have been recommended for blocking.
The DGGI’s annual report for FY24 flagged the online gaming industry as a “high-risk” sector for tax evasion, money laundering, cyber fraud, juvenile delinquency, and socio-economic issues.
Despite legal clarity from October 1, 2023, which subjects gaming entities to a 28 per cent tax on the total sum deposited by players, enforcement remains challenging.
Many firms operate from offshore tax havens such as Malta, Curacao Islands, British Virgin Islands, and Cyprus, complicating efforts to determine their ultimate ownership.
The online gaming industry has experienced significant growth, with a compound annual growth rate (CAGR) of 28 per cent, reaching ₹16,428 crore in FY24, driven by factors such as widespread smartphone penetration, improved internet connectivity, a growing youth population, and the development of local gaming content.
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