The ministry of finance in India has granted new powers to the directorate general of GST Intelligence (DGGI) to begin blocking online gaming websites and mobile applications that are illegally avoiding goods and services tax (GST) in the country.
Confirmed this week in the Gazette of India, the new regulation – SO 95(E) – is effective immediately. The ministry said this intends to address fraudulent activities under both the Information Technology Act 2000 and GST Act 2017.
The DGGI is an agency tasked with mitigating tax evasion on behalf of the GST Council which enforces the tax requirement.
Online real money gaming companies operating in India are required to pay a 28% turnover tax for skill games. This was first enforced in October 2023 and was reiterated on 10 September last year, following a performance review of the tax measure.
Operators must be registered under the Simplified Registration Scheme of the IGST Act and appoint a person based in India to pay their GST contribution.
Failure to comply could see their websites and apps blocked in the country. Previously, this was done by submitting the blocking order to the ministry of electronics and information technology. However, the new regulation allows the DGGI to directly send takedown notices to operators.
This order will also allow the DGGI to identify sites involved in creating fake GST certificates. The organisation will also monitor non-compliant business applications that avoid paying tax, as well as prevent the use of platforms such as WhatsApp for fraudulent transactions.
As part of the new government order, the department of revenue is appointing a new role in the form of an ‘additional or joint director (intelligence)’ at the DGGI headquarters as nodal officers. They will implement the provisions set out in Section 14A(3) of the GST Act.
DGGI flags online gambling as high-risk sector
Headquartered in New Delhi, the DGGI operates with 26 zonal units and 40 regional offices spread across several major cities. The organisation has significant reach and influence in India.
In September local paper the Business Standard reported the DGGI had singled out online gaming as an area of particular concern in its annual report for the 2024 financial year. It identified the sector as being “high-risk” for issues such as tax evasion, money laundering and cyber fraud.
During FY24, the DGGI flagged tax evasion amounting to R81,875 crore (£7.64 billion/€9.22 billion/$9.54 billion) across just 78 cases.
The rule change also comes after the Digital India Foundation (DIF) last October warned against fraud, money laundering and terrorism financing in online gaming. A DIF report found the sector is ill-equipped to prevent fraud and money laundering.