DGGI gains authority to issue takedown orders against GST-evading online gaming apps

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To curb tax evasion in the online money gaming sector, the Directorate General of GST Intelligence (DGGI) has been granted authority to directly issue takedown notices to intermediaries, including hosting providers, search engines, and domain registrars. The notification, issued by the Ministry of Finance and published in the official gazette, enables DGGI officers to block platforms that fail to comply with tax regulations under the Integrated Goods and Services Tax (IGST) Act as per Hindustan Times.

The central government has designated an Additional or Joint Director (Intelligence) at the DGGI headquarters as the nodal officer to carry out these actions under Section 79(3)(b) of the Information Technology Act. This  aims to address non-compliance by online gaming platforms operating without registering under the IGST Act or avoiding tax obligations.

Section 14A of the IGST Act mandates offshore online money gaming platforms offering services in India to register under the Simplified Registration Scheme and appoint a representative within the country to ensure tax payments. Non-compliance could lead to the platforms being blocked under Section 69A of the IT Act, a process that previously required coordination with the IT Ministry.

Now, the DGGI can directly enforce takedowns, bypassing earlier bureaucratic steps. The term “online money gaming” covers all games—whether of skill or chance—where participants deposit money with the expectation of monetary rewards, encompassing both legal and illegal gaming activities.

The DGGI’s annual report for FY24 also flagged the online gaming industry as a high-risk sector for tax evasion, money laundering, and cyber fraud. It reported ₹81,875 crore in GST evasion across 78 cases, the highest for any sector during the financial year. Offshore gaming entities often base themselves in tax havens such as Malta, the British Virgin Islands, or the Curacao Islands, making enforcement challenging.

Online gaming platforms attract a 28% GST on the total deposits made by players, yet many platforms evade these obligations. In December 2024, the government identified 642 offshore gaming entities for investigation, highlighting the scale of the issue.

The new notification signals the government’s increasing scrutiny of the online gaming sector, which has seen exponential growth in recent years. By streamlining enforcement mechanisms, the authorities aim to deter tax evasion and bring greater accountability to the industry.

For gaming platforms, this could mean enhanced regulatory oversight and the risk of being blocked if they fail to comply with tax requirements. For intermediaries, the move highlights their role in ensuring compliance by entities they support.

The latest development reaffirms the government’s commitment to regulating the digital economy and addressing challenges posed by rapidly evolving sectors like online gaming.

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