DGGI hands two more show-cause notices worth Rs 3000 crore for alleged tax evasion

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Two more online gaming companies has been handed show-cause notices by the Directorate General of Goods and Services Tax Intelligence (DGGI) for alleged tax evasion amounting to Rs 3,000 crore.

The notice handed to these companies are similar to what Bengaluru-based Gameskraft Technology received for alleged GST evasion back in September 2022.

Speaking to moneycontrol, an official said, “Some online gaming companies are involved in money stakes, which is betting. So, the tax department will give the same treatment as in the case of Gameskraft.”

The official further said that now the DGGI has issued three notices for alleged tax evasion worth Rs 24,000 crore, including the previous Gameskraft notice for Rs 21,000 crore. “It’s their tax liability as per the income-tax authority’s stand. A probe is going on. We cannot take two different stands in case of equally placed taxpayers,” the official added.

According to the notice handed to Gameskraft, the company provided games on their platforms that pertain to gambling and hence were required to be taxed at a higher price. The show-cause noticer was quashed by Karnataka HC on 11 May 2023 after multiple hearings. The CBIC however is reportedly planning to appeal against the Karnataka HC ruling in the Supreme Court.

The GST council has also recently announced a 28% tax rate on full face value for online gaming, casinos and horse racing. However, the show-cause notice to Gameskraft was issued before the decision was taken, so it remains to be seen how the government’s claims hold up in the SC.

Apart from action on firms in India, the GST authorities are also looking for ways to prevent tax evasion by the offshore betting platform that are operating without licenses. The DGGI has previously asked the Ministry of Electronics and Information Technology (MeitY) to block access to these websites, but as of now, these websites use mirror domains to bypass the ban.