DGGI gains Powers to Send Takedown Orders against GST-Evading Online Gaming Apps: All You Need to Know

In a noteworthy development for the fast-growing online gaming industry, the Central Government has authorized the Directorate General of GST Intelligence ( DGGI ) to issue takedown notices against gaming apps and websites that fail to comply with Goods and Services Tax ( GST ) regulations. This decisive measure, announced on January 6, 2025, has major impacts on the digital sphere that has expanded at a breathtaking pace.

Read More: CBIC appoints Nodal Officer for Section 14A(3) GST on Online Gaming

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Evolution of GST in the Gaming Sector

The online gaming industry in India has undergone a dramatic transformation over the past ten years. Advances in mobile technology and the widespread adoption of high-speed internet have not only reshaped how people consume entertainment but also created an entirely new ecosystem around digital gaming.

However, along with this rapid expansion, the need for robust regulation has become increasingly evident. Early on, the line between games of skill and games of chance was often blurred, leaving many gaming platforms in a legal grey area. Before specific tax provisions were introduced, there was considerable confusion around whether these platforms should be subject to GST, and if so, at what rate. The Integrated Goods and Services Tax ( IGST ) Act, 2017, sought to address these uncertainties by laying out clearer tax guidelines, although enforcement remained a major challenge.

Under the IGST framework, Section 14A was introduced to regulate offshore companies offering online gaming services in India. These foreign entities were required to register under the Simplified Registration Scheme and appoint an individual within India to handle GST liabilities. Despite the enactment of Section 14A, regulatory gaps persisted, and the authorities observed that a significant chunk of gaming businesses—especially those based in tax havens—were continually slipping through the cracks.

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Present Legal Position

In a move to further tighten oversight, the government recently designated the Additional or Joint Director (Intelligence) at DGGI Headquarters as the nodal officer under Section 14A(3) of the IGST Act. This appointment carries additional weight because it empowers the nodal officer to directly issue takedown orders under Section 69A of the Information Technology Act. Notably, this bypasses the earlier requirement to channel such requests through the Ministry of Electronics and Information Technology (MeitY), simplifying and expediting the enforcement process.

The term “online money gaming” within this context is broad, covering both skill-based and chance-based games where participants deposit money in hopes of winning. This includes everything from card-based skill games to sports betting and purely chance-oriented gambling platforms. All these fall under the 28% GST bracket on the total amount deposited by players. Yet many international gaming websites—operating from jurisdictions like Malta, the British Virgin Islands, and the Curacao Islands—have been consistently dodging these tax obligations.

Challenges identified by DGGI

The DGGI’s annual report for FY24 labeled the online gaming sector as “high-risk,” flagging concerns around tax evasion, money laundering, cyber fraud, and even the potential for juvenile delinquency. According to the report, the sector evaded a staggering ₹81,875 crore in GST, spread across 78 registered cases—an alarming figure that underscores the depth of non-compliance.

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Moreover, the report indicated that the regulatory body had identified 642 offshore entities for investigation in 2024, reinforcing the pervasive nature of tax avoidance in this space. Since many of these platforms function outside India’s direct jurisdiction, regulators have found it exceedingly difficult to enforce compliance. Until now, the mechanisms in place were often too cumbersome or slow to meaningfully deter illegal activities.

Impact of the New Powers

By granting the DGGI direct authority to issue takedown notices, the government has effectively reshaped the enforcement dynamics in the gaming sector. Several significant outcomes are anticipated:

Having the power to send takedown orders without going through multiple bureaucratic channels strengthens the DGGI’s ability to enforce tax compliance. Offshore platforms that previously ignored GST rules now risk having their apps and websites blocked at a moment’s notice.

The risk of receiving a takedown order serves as a potent deterrent for businesses that might be tempted to evade taxes. By raising the stakes, the government hopes to encourage a culture of voluntary compliance, thereby reducing the burden on enforcement agencies.

In the past, the necessity to route takedown requests via the IT Ministry resulted in prolonged back-and-forth processes. Empowering the DGGI to directly issue orders should accelerate enforcement actions and minimize administrative delays.

Domestic gaming companies that adhere to GST requirements have long complained about unfair competition from offshore entities that gain an edge by not paying taxes. These new measures aim to even out that playing field, promoting a healthier environment for local businesses.
Tighter enforcement and the consequent rise in compliance and penal rates are expected to boost GST revenues from the online gaming industry. This, in turn, supports government-funded initiatives and overall economic development.

Critics argue that too much regulatory zeal could stifle the creativity and economic potential of a sector that offers significant job opportunities and attracts global investment.

Indeed, skill-based gaming firms worry about being lumped together with purely chance-based gambling platforms, potentially subjecting them to onerous regulations.

A continuing point of contention involves whether a particular game constitutes skill or chance, an issue that has yet to be fully resolved by Indian courts and policy frameworks. Clearer guidelines in this regard could help legitimate skill-based gaming platforms operate without the fear of sudden, sweeping regulatory action. For the online gaming industry to thrive, policymakers and sector leaders must engage in a constructive dialogue that safeguards revenue while fostering growth and innovation.

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By designating the Additional or Joint Director (Intelligence) of the DGGI as the nodal authority under Section 14A(3) of the IGST Act, the Central Government has sent a powerful message: tax evasion in the online gaming industry will not be tolerated. Equipping the DGGI with the ability to issue direct takedown orders demonstrates a clear intent to root out non-compliance and reinforce a level playing field.

The industry, for its part, now faces a critical juncture. Continued expansion will require scrupulous adherence to GST requirements and other regulations that govern money deposit-based gaming.

Ultimately, the empowerment of the DGGI represents a watershed moment in India’s regulatory landscape. If implemented judiciously, these new powers can help promote transparency and protect consumers without stifling the potential for innovation. Nevertheless, it remains vital for policymakers to understand the online gaming community to ensure that the path to accountability and compliance does not become an insurmountable barrier to growth and entertainment access to the younger generation of India.

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