The Directorate General of GST Intelligence (DGGI) is working with the Reserve Bank of India (RBI) and commercial banks across the country to formulate a mechanism to track ‘real-time’ transactions of online gaming companies based outside of India. The move is expected to help in curbing tax evasion by the firms, sources privy to the development told FE.
“The DGGI will get real-time data of all transactions that are taking place, which the banks will share with us. Through this, the agency will be able to keep track of the value of transactions, and consequently the tax liability,” an official said.
“Hundreds of offshore online gaming firms, which provide service to Indian users, are non-registered with domestic GST authorities, and pay no tax,” the person added. “We’re looking at ways to increase compliance and curb evasion.”
In FY24, the online gaming companies were the biggest tax evaders with Rs 82,000 crore evasion detected, which was around 41% of the total Rs 2 lakh crore evasion detected during the year.
In the annual report for 2023-24, the DGGI had flagged that bringing the online gaming entities under the tax net continues to be an ‘uphill task’. It had said that many firms are set up in offshore tax havens–such as Malta, Curacao Islands, British Virgin Islands, Cypress etc–which makes it difficult for the authorities to ascertain their ultimate ownership.
So far, over 650 offshore online gaming firms have been identified, which are not registered with GST authorities, the report had revealed. And the DGGI has recommended blocking of around 167 websites of such firms to the Ministry of Electronics and Information Technology (MeitY).
The DGGI had suggested that a multipronged approach to deal with this sector is the need of the hour. An inter-department committee comprising CBIC, CBDT, MeiTY, MCA, RBI, and department of consumer affairs, and industry bodies may be set up to develop a comprehensive strategy to combat proliferation of such platforms, it had recommended.
Experts say that real-time sharing of transaction data is likely to be extremely helpful for several reasons such as accurate tax assessment, prevention of evasion, improved enforcement, etc. “In addition, real-time data sharing can help ensure that online gaming firms operate within the Indian regulatory framework, thus, preventing illegal or unregulated gaming activities,” said Adarsh Somani, partner at Economic Laws Practice.
Krishan Arora, partner, Grant Thornton Bharat said that moreover, integrating GST tracking mechanism with global payment systems, including cryptocurrency wallets and online banking may also provide real-time monitoring of cross-border transactions. “These combined actions along with real time monitoring may significantly reduce tax evasion by offshore online gaming firms and improve overall compliance,” he said.
