The Directorate General of GST Intelligence (DGGI) has said that despite amendment in laws, bringing online money gaming entities under tax net is still an ‘uphill task’. The agency has placed this sector at third place in the list of ‘Evasion Prone Services’ with over 81000 crore worth of evasion on 78 cases during fiscal year 2023-24 while voluntary payment of ₹53 crore more.
“Despite the legal clarity w.e.f. October 1, 2023, bringing the gaming entities under the tax net continues to be an uphill task. Many such firms are set up in offshore tax havens (i.e. Malta, Curacao Islands, British Virgin Islands, Cypress etc.) known for their opacity, thus making it difficult to ascertain their ultimate ownership,” the agency said in its Annual Report for FY24. Further, it said that there are online gaming platforms who keep on changing their URL/website/apps to avoid tax compliance.
“Use of dark web or VPN based platforms for such supply further accentuates the difficulties in tax law enforcement,” the agency said.
Accordingly, it has called for a multi-prolonged approach to deal with this sector as need of the hour. “An Inter-Department Committee comprising of CBIC, CBDT, ED, MeitY, MCA, MIB, RBI, Department of Consumer Affairs and the like along with Industry bodies may be set up to develop comprehensive strategy and regulations to combat the proliferation of such platforms, ensuring regulatory compliance, consumer protection and national security,” it said.
The GST Council, in its meeting dated July 11 last year, recommended that actionable claims supplied in casino, horse racing, and online gaming are leviable to a GST rate of 28 per cent and recommended to carry out amendments in the law to remove any ambiguity. In the 51st GST Council meeting held on August 2 last year, a few States requested that the matter be reconsidered and after a detailed discussion, the GST Council decided to continue with its earlier recommendation. Later, the law was amended following which there was spurt in issuance of show cause notices.
Prior to October 1, 2023, the term had no specific mention under GST law, and various cases of tax evasion booked by the department on online money gaming are essentially based on the premise that such games amount to betting/gambling, and are therefore classifiable as ‘Goods’ under GST law, on which 28 per cent GST is payable on the face value/Buy-in value of the bet.
Accordingly, DGGI initiated action against 118 domestic entities, and Show Cause Notices have been issued to 34 taxpayers involving tax amount of over ₹ 1.10 lakh crore. Furthermore, 658 Offshore entities have been identified as non- registered/non-compliant entities and investigation against the same have been initiated, and 167 URL/websites have been recommended for blocking, the report said.
Many companies, who received notices moved to the Supreme Court with the contention that the games like rummy, poker and others are games of skill and, therefore, cannot be classified as betting/gambling. Now, “the Court’s verdict on the matter shall have a significant impact on how the concept of online money gaming is understood,” the report said.
It also mentioned that creating awareness and education among digital nagriks about safe and responsible gaming practices, promoting the use of legitimate platforms registered with MeitY or verified as permissible Real Money Gaming Platforms under the IT Rules, 2021, and entering into reciprocal arrangements with foreign governments for information sharing and tax enforcement may go a long way in effecting regulatory compliance in this industry.