Indian Government Intensifies Scrutiny on Online Gaming Sector
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DGGI flags online gaming as 'high-risk' sector, recommends blocking 167 websites - Times of India
The Directorate General of GST Intelligence (DGGI) has urged for increased scrutiny of online gaming platforms, citing concerns over potential tax evasion and money laundering risks. According to news agency PTI, an inter-departmental committee with representatives from the Enforcement Directorate (ED), Reserve Bank of India (RBI), tax, and consumer affairs departments may be set up.According to a DGGI report, the committee will work to combat the proliferation of online gaming platforms and ensure regulatory compliance. The DGGI annual report for 2023-24 has flagged that 'online money gaming' is a "high-risk" industry for tax evasion, money laundering, cyber fraud, juvenile delinquency, and various socio-economic issues. CBIC issues notice to gaming companies The report further states that the GST intelligence wing of the Central Board of Indirect Taxes and Customs (CBIC) has initiated action against 118 domestic online gaming entities. CBIC, it says has sent Show Cause Notices to 34 taxpayers involving a tax amount of Rs 1,10,531.9 crore. These notices were issued to these gaming firms for failing to pay the mandated 28% Goods and Services Tax (GST) rate. Additionally, DGGI recently identified 658 offshore entities operating without proper registration or compliance, all of which are now under investigation. As part of these efforts to enforce regulations, authorities have also recommended blocking 167 URLs and websites associated with non-compliant gaming operations. The TOI Tech Desk is a dedicated team of journalists committed to delivering the latest and most relevant news from the world of technology to readers of The Times of India. TOI Tech Desk's news coverage spans a wide spectrum across gadget launches, gadget reviews, trends, in-depth analysis, exclusive reports and breaking stories that impact technology and the digital universe. Be it how-tos or the latest happenings in AI, cybersecurity, personal gadgets, platforms like WhatsApp, Instagram, Facebook and more; TOI Tech Desk brings the news with accuracy and authenticity.
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Govt may set up panel to ensure compliance by online gaming platforms
An inter-departmental committee with representatives from ED, RBI, tax and consumer affairs departments may be set up to combat the proliferation of online gaming platforms and ensure regulatory compliance, a DGGI report said. The GST intelligence wing of the Central Board of Indirect Taxes and Customs (CBIC) has initiated action against 118 domestic online gaming entities, and Show Cause Notices have been issued to 34 taxpayers involving tax amount of Rs 1,10,531.91 crore. Click here to connect with us on WhatsApp The notices were issued to these gaming companies as they were not paying GST at 28 per cent rate. Furthermore, 658 offshore entities have been identified as non- registered/non-compliant entities and are being investigated by the DGGI. Also, 167 URL/websites have been recommended for blocking. The Directorate General of GST Intelligence (DGGI) annual report 2023-24 flagged that online money gaming' is a "high-risk" industry for tax evasion, money laundering, cyber frauds, juvenile delinquency and various socio-economic evils. Despite the legal clarity with effect from October 1, 2023, bringing the gaming entities under the tax net continues to be an uphill task. More From This Section 90% of financial institutions focus on AI, GenAI for innovation: PwC India India audio device mkt sees remarkable growth, hits Rs 5,000 cr sales: GFK Regulatory, supply chain challenges affecting growth of medtech sector Increasing freight costs, container shortages threaten exports: GTRI Empathy, inclusive upskilling key to foster thriving work cultures: Report 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. There are online gaming platforms which 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 DGGI said. "Therefore, a multi-prolonged approach to deal with this sector is need of the hour. An Inter-department committee comprising 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 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. In October 2023, the government clarified in the GST law that online gaming attracts a 28 per cent tax on the total sum deposited by the players with the entity. The online gaming industry has grown exponentially in the last few years, at a CAGR of 28 per cent, reaching Rs 16,428 crore in FY23-24 as per an estimate. This boost is largely attributed to factors like widespread smartphone penetration, improved internet connectivity, a growing youth population and the development of local gaming content. Several of show cause notice recipients have approached the court filing Writ Petition against the notices, and the matter is sub-judice before the Hon'ble Supreme Court of India. The noticees have essentially contended that games like rummy, poker and others are games of skill and, therefore, cannot be classified as betting/gambling. The terms 'betting' and 'gambling' are not defined in GST law. "Sir William Raynell Anson, a renowned British jurist, has defined a wager or bet as 'a promise to give money or money's worth upon the determination or ascertainment of an uncertain event'. The Hon'ble Supreme Court's verdict on the matter shall have a significant impact on how the concept of online money gaming is understood," the DGGI said. 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, the DGGI said. Also Read Rs 2 trn GST evasion detected in FY24, online gaming most prone to evasion Online gaming industry eyes relief as stakeholders await GST Council review GST Council set to meet today, talks on rate rationalisation to kick off GST council to discuss report on online gaming taxation, fake registration Global gaming major Flutter bets big on India, opens GCC in Hyderabad
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The Directorate General of GST Intelligence (DGGI) flags online gaming as a high-risk sector, recommending the blocking of 167 websites. Meanwhile, the government considers establishing a panel to ensure compliance by online gaming platforms.
DGGI Identifies Online Gaming as High-Risk Sector
The Directorate General of GST Intelligence (DGGI) has raised concerns about the online gaming sector, labeling it as a high-risk industry for potential tax evasion. In a significant move, the DGGI has recommended blocking access to 167 websites associated with online gaming activities
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. This action underscores the government's growing scrutiny of the rapidly expanding online gaming market in India.Proposed Website Blockages
The recommendation to block these websites comes as part of the DGGI's efforts to combat tax evasion and ensure compliance within the sector. The identified platforms are suspected of operating without proper registration and potentially evading Goods and Services Tax (GST) payments. This move signals a stricter approach towards regulating the online gaming industry and enforcing tax compliance
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.Government Considers Compliance Panel
In a parallel development, the Indian government is contemplating the formation of a dedicated panel to oversee compliance by online gaming platforms
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. This proposed panel would be tasked with ensuring that gaming companies adhere to the recently implemented rules and regulations governing the sector.Scope of the Compliance Panel
The potential panel would have a broad mandate, focusing on various aspects of compliance:
- Monitoring adherence to know-your-customer (KYC) norms
- Overseeing the implementation of responsible gaming practices
- Ensuring compliance with anti-money laundering regulations
- Verifying the deployment of proper grievance redressal mechanisms
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Industry Reaction and Implications
The online gaming industry in India has experienced significant growth in recent years, attracting both domestic and international players. These regulatory measures are likely to have far-reaching implications for the sector. While some industry stakeholders may view these steps as necessary for creating a more structured and compliant ecosystem, others might perceive them as potential hurdles to growth and innovation.
Future Outlook
As the government intensifies its regulatory oversight, the online gaming sector in India is poised for significant changes. The proposed compliance panel and the DGGI's recommendations highlight the government's commitment to creating a more regulated and transparent online gaming environment. These developments are expected to shape the future landscape of the industry, potentially leading to consolidation and the emergence of more compliant and responsible gaming practices.
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