The online gaming industry is under scrutiny. The Directorate General of Goods and Services Tax Intelligence (DGGI) has significantly ramped up enforcement actions against offshore online gaming entities. Tax evasion and non-compliance with Indian GST laws are the key focus areas. This post details the DGGI’s recent operations, the scale of the issue, and advice for the public.
GST Law and Online Money Gaming
‘Online Money Gaming’ is classified as a supply of ‘Goods’. A 28% tax is applicable. Registration under GST is mandatory for entities operating in this sector. Both domestic and foreign operators are part of the online money gaming industry.
Key Actions Taken by DGGI
The DGGI is actively monitoring around 700 offshore entities. These entities are involved in the supply of online money gaming, betting, and gambling. Tax evasion is being addressed through several key measures:
i) Website Blocking: 357 websites/URLs of non-compliant offshore online gaming entities have been blocked. This action was taken in coordination with the Ministry of Electronics and Information Technology (MeitY) under Section 69 of the IT Act, 2000.
ii) Bank Account Freezing: Nearly 2,400 bank accounts have been blocked in separate cases. Approximately Rs. 126 crore has been frozen.
Recent operations targeted the blocking of bank accounts used for collecting participants money. These operations attached 2000 bank account and Rs 4 crore, with the aid of I4C and National Payments Corporation of India (NPCI).
392 bank accounts were linked with UPI Ids. These accounts, which were found on some offshore entity websites, were put on debit freeze, with a total sum of Rs. 122.05 crore provisionally attached.
iii) Targeting Mule Accounts: Operations have been conducted against individuals running online money gaming platforms from outside India. 166 mule accounts linked to these platforms have been blocked. Three individuals have been arrested, with further investigations underway.
These platforms include Satguru, Mahakaal and Abhi247 Online Money Gaming Platforms.
The Impact of Non-Compliance
Non-compliance by foreign entities creates several issues:
i) Unfair Competition: Fair competition is distorted. Local businesses are harmed.
ii) Market Distortion: The market is skewed by these practices.
iii) Circumvention of Restrictions: New web addresses are created to bypass restrictions.
iv) Illicit Activities: Funds collected through mule accounts could potentially be funneled into illicit activities, posing a risk to national security.
DGGI’s Public Advisory
The public is strongly advised to exercise caution. Engagement with offshore online money gaming platforms is discouraged.
i) Many bollywood celebrities, cricketers, youtube, whatsapp and instagram influencers may be seen endorsing these platforms.
ii) Personal finances may be jeopardized by these platforms.
iii) Activities that undermine financial integrity and national security may be indirectly supported.
Future Actions
The DGGI is committed to proactively addressing the issue of illegal offshore gaming entities. Enforcement actions will be more stringent, particularly with the upcoming IPL season. Responsible gaming involves staying informed and choosing regulated platforms.
Legal and Regulatory Framework
i) GST Law: Online Money Gaming is recognized as an actionable claim.
ii) IT Act, 2000 (Section 69): Enables the blocking of websites.
Other regulatory bodies involved are: I4C, NPCI and MeitY.
Disclaimer: This blog post is for informational purposes only and should not be considered as financial, legal, or tax advice. It is based on a press release from the Ministry of Finance (PIB: 2113991) and may not reflect all recent updates or legal interpretations. Always consult with qualified professionals for specific advice.