Internet Compliance and Online Gaming: Addressing Tax Challenges

Internet Compliance and Online Gaming Regulation

The Directorate General of Goods and Services Tax Intelligence (DGGI) has proposed forming an inter-departmental committee to tackle tax issues arising in the online gaming sector. This committee aims to bring together experts from various governmental bodies, including the Enforcement Directorate, Reserve Bank of India, and others, to address the alarming cases of non-compliance.

Tax Challenges and Compliance Issues

• 118 domestic entities have been flagged with show cause notices for failing to meet the 28% GST rate.
• The DGGI identified 658 offshore gaming entities non-registered or non-compliant.
• 167 URLs have been recommended for blocking to reduce illegal operations.

According to the DGGI's annual report for 2023-24, the online money gaming industry is classified as high-risk due to its association with socio-economic issues, prompting the need for stringent regulatory compliance.

Looking Ahead: Awareness And Education

The DGGI urges the need for digital education regarding responsible gaming practices. It emphasizes promoting platforms that comply with the IT Rules, 2021, and suggests entering into reciprocal agreements with foreign nations for better tax enforcement.

This initiative arises as more than 50% of online gaming companies have reported stagnant revenues post the imposition of GST in India. Despite challenges, the industry shows potential with a remarkable growth rate, reaching a valuation of INR 16.4 Cr in FY23-24.