Record Rs 81,875 crore GST evasion detected in online gaming in FY24

In terms of sectors, online money gaming was followed by the BFSI sector, which saw Rs 18,961 crore evaded in 171 cases

The Directorate General of GST Intelligence (DGGI), the central investigation and anti-evasion arm under the finance ministry, has detected the highest-ever goods and services tax (GST) evasion by the online money gaming industry, amounting to Rs 81,875 crore in FY24 across 78 cases.

In its latest annual report, the DGGI said it detected a record 6,084 cases of tax evasion in 2023-24, involving Rs 2.01 trillion in GST, which is double the Rs 1.01 trillion identified in FY23 across 4,872 cases.

According to the report, 46 per cent of the evasion cases were related to non-payment of taxes through clandestine supply and undervaluation, 20 per cent involved fraudulent Input Tax Credit (ITC) claims, and 19 per cent pertained to improper ITC claims or failure to reverse them.

After online money gaming, the BFSI sector ranked second, which saw Rs 18,961 crore evaded across 171 cases. Other sectors included works contract services (343 cases, Rs 2,846 crore) and pharmaceuticals (22 cases, Rs 40 crore).

Additionally, 1,976 cases of GST evasion were detected in the iron, copper, scrap, and alloys sectors, involving Rs 16,806 crore in FY24. The pan masala, tobacco, cigarettes, and bidi industries ranked second in evasion, with 212 cases amounting to Rs 5,794 crore. Other sectors included plywood, timber, and paper (238 cases, Rs 1,196 crore), electronic items (23 cases, Rs 1,165 crore), and marble, granite, and tiles (235 cases, Rs 315 crore).

The DGGI report also recommended the formation of an inter-departmental committee, including representatives from the Enforcement Directorate, Reserve Bank of India, tax authorities, and consumer affairs departments, to combat the proliferation of online gaming platforms and ensure regulatory compliance.

“Therefore, a multi-pronged approach to deal with this sector is the need of the hour. An inter-department committee 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.

The GST intelligence wing has initiated action against 118 domestic online gaming entities and issued show-cause notices to 34 taxpayers, involving a tax amount of Rs 1.1 trillion. These companies had failed to pay GST at the applicable 28 per cent rate.

Additionally, 658 offshore entities have been identified as non-registered or non-compliant, and are being investigated by the DGGI. Also, 167 websites have been recommended for blocking.

The DGGI 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, subjecting gaming entities to a 28 per cent tax on the total sum deposited by players, enforcement 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, making it difficult to ascertain their ultimate ownership.

The online gaming industry has grown exponentially in the past few years, at a compound annual growth rate (CAGR) of 28 per cent, reaching Rs 16,428 crore in FY24, according to an estimate.

This growth is largely attributed to factors like widespread smartphone penetration, improved internet connectivity, a growing youth population and the development of local gaming content.

WATCH: Highest GST evasion detected in FY24 in online gaming; Know other sectors