1 day Ago By Sharveya Parasnis
The Indian government has empowered the Directorate General of GST Intelligence Headquarter (DGGI-HQ) to instruct intermediaries to block the websites of online gaming companies that are suspected of evading taxes. As per a gazette notification posted by the Ministry of Finance, the government has appointed the Additional/ Joint Director (Intelligence) as the nodal officer for the task. The government has granted the powers to the DGGI-HQ under section 14A(3) of Integrated Goods and Services Tax Act, 2017, which allows for the blocking of any “information generated, transmitted, received or hosted in any computer resource,” used by an online gaming company that has failed to pay taxes.
This includes companies located outside of India. The notification also cites clause (b) of sub-section (3) of section 79 of the Information Technology Act, which holds intermediaries liable if they fail to remove or block content when ordered to by the government. It also includes clause (d) of sub-rule (1) of rule 3 of the Information Technology (Guidelines for Intermediaries and Digital Media Ethics Code) Rules, which prohibits intermediaries from storing unlawful information.
Read together, the gazette notification indicates that the government is planning to strike against tax-evading foreign gaming platforms by ordering intermediaries like search engines and social media platforms to block their online operations in India. Background: The DGGI had stated earlier this year that the online real money gaming sector was responsible for the highest amount of GST evasion in Financial Year 2023-2024. The sector evaded total taxes worth Rs.
81,875 crore in FY24 across 78 cases. Earlier in 2023, the government hiked the GST on real money online gaming to 28% from 18%, essentially doing away with the difference between “real money online gaming” and gambling. When the amendment came into force on October 1, 2023, multiple companies received massive tax evasion notices extending back to previous financial years.
Dream Sports reportedly received claims between Rs. 25,000 to Rs. 40,000 crore, while Delta Corp was served with a Rs.
16,822 crore notice for the period of July 2017 to March 2022. Tax revenues from the sector increased five-fold within six months of the hike, revealed Finance Minister Nirmala Sitharaman later on. Collections jumped 412% to Rs.
6,909 crore from Rs. 1,349 crore in the October 2023 to March 2024 period. Criticism From The Industry: The tax hike was a very controversial decision that led to protests by the industry.
Over 100 skill-gaming companies wrote a letter to the government, arguing that it would “reverse the growth trajectory of the industry.” The letter claimed that the GST would “encourage offshore gambling operators, drive Indian users to them, and ultimately lead to neither optimal tax collection nor the growth of the legitimate industry.” Lawyer Abhishek Malhotra, Managing Partner at TMT Law Practice, had previously called the tax hike an “immediate and existential threat to the entire gaming ecosystem.
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