DGGI issues notice to online gaming companies

In a move that signals a major crackdown on online gaming operators in India, the Directorate General of GST Intelligence DGGI has started issuing notices to all such companies in the country.

The tax authorities are of the view that online gaming companies in India have conducted massive tax evasion in the past few years, according to official sources.

The Bengaluru wing of the DGGI has sent show cause notice to online gaming company GamesKraft Technology Private Ltd for an amount of 21,000 crore, the source said.

The Karnataka High Court stayed the demand notice, and proceedings are underway at the court.

The DGGI has informed the Court that it is pursuing similar proceedings against the entire online gaming industry in India.

The department is expecting to recover nearly 2.5 lakh crore in taxes from online gaming companies, the source said.

The Supreme Court has issued notices to skill-based gaming companies and agreed to hear a plea by the Karnataka government challenging the High Court judgment, which struck down provisions of law prohibiting betting in online gaming.

The GST Council, which is expected to hold its 48th meeting in October, is deliberating its parameters of taxing online gaming, with the key question being whether to tax the entire bet at face value or net amount after reducing the prize money.

The company spokeswoman said the notice was a departure from the well-established law of the land. The company said it has discharged its GST and Income Tax liabilities as per standard industry practice and is confident that it will be able to respond to the notice to the full satisfaction of the authorities.

The DGGI has also cracked down on cryptocurrencies exchanges in India on the basis of alleged GST evasion.