DGGI Will Send Tax Evasion Notices To 12 Gaming Firms
A DGGI investigation started in 2022, and authorities found Rs 2,250 crore of evasion, mostly involving invoices raised from 2018 to March 2022.
DGGI Will Send Tax Evasion Notices To 12 Gaming Firms
The insurance companies claimed input tax credits without providing the goods and services underlying their invoices. Officials have sent notices. GST law requires that buyers have a GST-paid invoice and a receipt of goods or services to claim the input tax credit.
Input Tax Credits were passed on under the guise of marketing services using fraudulent invoices. In another case, tax authorities sent notices and summonses to insurance companies and recovered some tax, they claimed.
According to the official, Rs 700 crore have been collected as prepayment from these companies. It is reported that the DGGI has summoned 12 insurance companies.
About 10-12 mutual fund houses were previously notified by the DGGI that information about their past transactions was needed. The DGGI reported that some mutual funds recorded certain expenditures against which they applied for input tax credits.
AMCs allegedly overstated expenses in 2017-18, with a limit of 2.25 per cent of assets under management (AUM) for payments, according to DGGI. Several mutual funds wrongly claimed these credits by misrepresenting scheme costs as capital expenditures.
These mutual fund houses had claimed wrongful ITC, and DGGI sought recovery. DGGI, India’s government agency for controlling tax evasion, is targeting the gaming industry.
Several online gaming platforms have been targeted for alleged money laundering and tax violations. The DGGI claims the companies collect revenue in India but withdraw it overseas.
Playing online poker in India is illegal, and recent reports indicate that the country may take the opposite course. The platforms circumvent tax obligations with their actions, according to the agency.
They also make it easier for high-net-worth individuals to launder money and avoid paying taxes. Following the instance of Gameskraft Technologies, DGGI has almost finished investigating a dozen online gaming companies for tax evasion and will soon serve show-cause notices on them.
As of June 2022, Gameskraft has been issued the most prominent fiscal notice in the history of GST Intelligence. Gameskraft’s activities are gambling and betting. Gameskraft is still on trial, but reports indicate that other companies under investigation will not be restrained while receiving show-cause notices.
The department is about to complete its investigation into other online gaming companies and issued show-cause notices. Eleven to twelve companies will be sent notifications of show-cause soon. As of now, a final determination has yet to be made regarding how much evasion has occurred.
GST On Online Gaming
GST is currently levied at 18% on online games and 28% on online betting. Also, the GST law must appropriately define games of skill or chance. However, the GST rate will likely be finalized at the council meeting.
It was proposed by the group of ministers (GoMs) that all online games, regardless of chance or skill, have a 28% GST rate. GST council members should have reached a consensus during the previous meeting.
In addition, the online gaming industry favours a 28% GST but feels it should be based on gross gaming revenue (GGR) instead of entry fees. A law firm specializing in tax law, Lakshmikumaran & Sridharan (LKS), has also analyzed why GST in GGR is best for an online gaming industry that is thriving.
As much as INR120 billion (US$1.46 billion) of capital has been lost to unlicensed gaming. April 2019 – November 2022 is the period covered by that figure. Financial movements are impossible to quantify. Those looking to operate in India must comply with an overdue tax calculation and GST registration.
If such a gambling site fails to meet the required standards, tax officials will refer the matter to MEITY for prohibition. In addition to international gaming platforms, the scrutiny also extends to domestic ones.
Indian tax evasion agency DGGI is targeting the gaming industry as part of its initiative to control tax evasion. In its investigation into money laundering and tax evasion, the agency has targeted around 38 online gaming platforms.
Last year, India’s Finance Minister Nirmala Sitharaman (centre) presented the country’s new budget to government officials. Money laundering and tax evasion are allegations filed by a ministry team investigating tax evasion.
According to the DGGI, companies collect revenue from Indian consumers but export it. Despite recent reports, India has not legalized online gambling. Using their actions, the platforms can circumvent tax obligations in the country.
Moreover, they let high-net-worth individuals avoid paying taxes and laundering money. Unlicensed gaming activity is responsible for billions of dollars in lost revenue, according to the DGGI.
From April 2019 to November 2022, that figure pertains to 12 months. The financial movement cannot be precisely calculated. Tax evasion and money laundering have increased as online betting on seemingly free gaming platforms has surged.
Additionally, these platforms enable payments through foreign-drawn bank cards and cryptocurrencies, making it impossible to trace the origin of the money. To operate in India, offshore gaming companies must adhere to overdue tax calculations and GST registration.
If the gambling site fails to meet the required standards, the Ministry of Electronics and Information Technology (MeitY) will be notified for prohibition. Gaming platforms within the country are also subject to scrutiny.
Ranking officials at the companies could face criminal charges for continuing violations, according to the DGGI. It did not name the 38 entities on its radar, but some operators may have been targeted.
Offshore betting firms advertise their services in Indian newspapers, often featuring famous players in their ads. Gambling continues to pose a challenge for India.
Several legal cases have still been unresolved over what constitutes gambling, with politicians in different states fighting over the definition. The government has introduced new laws to alleviate some of the confusion.
