The DGGI uncovered ₹2 lakh crore in tax evasion, with ₹82,000 crore linked to online gaming companies.
The Directorate General of GST Intelligence (DGGI) unearthed significant tax evasion primarily driven by online gaming companies. The recent annual report reveals that tax evasion in this sector amounted to a staggering ₹2 lakh crore in FY24. Rupees ₹82,000 crore solely attributed to real money online gaming platforms. Offshore and domestic companies have been central to this investigation, prompting the department to take stringent measures.
Real Money Online Gaming Drives Tax Evasion
The GST department identified online gaming companies, especially those offering real money gaming services, as major tax evaders. The DGGI revealed that 41% of the total evasion came from these platforms. Out of 658 offshore gaming companies, 167 websites have been recommended for blocking due to their non-compliance with tax regulations.
In addition to the offshore firms, action has been initiated against 118 domestic online gaming platforms. Show Cause Notices involving tax amounts of ₹1,10,531.91 crore have already been issued to 34 companies. The department has raised concerns about the use of the dark web, VPNs, and constant changes to URLs by these platforms to avoid tax compliance.
Offshore Companies in Tax Havens Pose a Challenge
Offshore online gaming companies located in tax havens like Malta, Curacao Islands, Cyprus, and the British Virgin Islands are proving to be the most difficult to bring under the tax net. These jurisdictions are known for their opacity, which complicates the efforts of the Indian tax authorities.
The DGGI’s report emphasizes the challenge of enforcing GST on such companies. Many offshore firms operate through VPNs and cloud-based platforms, making it difficult to trace and regulate their operations. Despite these hurdles, the department managed to collect ₹2,675 crore from 574 offshore entities providing digital services to Indian customers in FY24.
Digital Service Providers Registering for GST Compliance
Beyond online gaming, the report highlights efforts to bring offshore digital service providers under the GST. Services delivered over the internet, known as Online Information and Database Access or Retrieval Services (OIDAR), include cloud services, digital content, and online advertising. Offshore entities that provide these services in India must register and discharge GST.
DGGI approached several companies, prompting Udemy (USA), Canva (Australia), OVH (France), and Blackboard (Netherlands) to comply with the GST mandate. However, many online casinos and other digital platforms continue to evade taxes intentionally. The department is ramping up efforts to enforce tax compliance among these entities, despite the complexities posed by offshore operations and digital platforms.
The GST department’s investigation into the digital sector has exposed widespread tax evasion amounting to ₹2 lakh crore. Online gaming companies are the primary culprits, with many operating from offshore tax havens to evade compliance. The DGGI’s actions against these firms aim to ensure that they register and pay their due taxes, helping the Indian government recover lost revenue.
