The Directorate General of GST Intelligence (DGGI) has slapped a tax demand of Rs 21,000 crore on Bengaluru-based online gaming company Gameskraft Technology (GTPL), exposing the massive scale of tax evasion in the thriving betting and gaming industry. This is the largest single indirect tax demand on any evader till date.
Confirming the development, a senior official from the Central Board of Indirect Taxes and Customs (CBIC) said: "The instant case shows the extent of tax evasion in betting and gambling."
In a show-cause notice issued to Gameskraft, known for popular card and fantasy games such as Rummyculture and Gamezy, the DGGI asked the firm to pay GST at 28% on aggregate betting amount of about Rs 77,000 crore for the period between 2017 and June 30, 2022.
The move follows forensic examination by the probe agency revealing that Gameskraft was not issuing any invoices to its customers and was submitting fake/back dates invoices to the taxman. Besides, the firm was entrapping its customers who had no choice but to continue to place bets as it did not allow them to quit once money was added to the wallet. According to the DGGI, Gameskraft allowed its players to place bets in the form of money stakes and on the outcome of card games played online.
"This is a case of gambling and betting. There are tens of thousands of ordinary people who are using this platform to play these games for money. The company has not been raising any invoices. The people have not been paying tax and the GTPL collected this huge amount (Rs 77,000 crore) by making them bet again and again," the CBIC official said.
Such online gaming, which doesn’t involve application of any skill, is taxed at the highest slab of 28% on the entire consideration, including winning amount and the platform fee.
Having identified huge tax evasion in the thriving online gaming industry, even the income tax department wants the winners in such games to use the updated income tax returns (ITR-U) scheme to disclose their incomes and pay the right amount of taxes with applicable interest.
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