ED Launches Investigation into Gaming Companies for Evading GST of More Than 20,000 Crore

The results of the investigation could have massive impact on the industry.

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The Enforcement Directorate (ED) has reportedly launched an investigation into gaming companies for GST evasion of approximately Rs 23,000 Cr. This is a major development within the fledgling gaming industry of India as Minister of State for Finance, Pankaj Chaudhary, confirmed that tax officers are now investigating this massive GST evasion.

It is implied that several online gaming companies are implicated in this investigation. The allegation is of the use of online gaming to siphon proceeds from several cases related to cyber and crypto asset frauds.

“The estimated evasion of GST by these companies works out of Rs 22,936 crore, relating to the period April 2019 to November 2022,” said Pankaj Chaudhary. It was also confirmed that assets amounting to Rs 289.28 crores have been seized under section 37A of the Foreign Exchange Management Act, 1999.

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Online Gaming Companies in India as well as Abroad Implicated on GST Evasion

Reports suggest that the Ministry of Finance has initiated investigations against some gaming companies located in India as well as abroad. The estimated evasion of GST, Rs 23,000 crores, had been accrued from April 2019 to November 2022, as confirmed by Pankaj Chaudhary.

The Minister of State for Finance responded to questions asked in the Lok Sabha, and had this to say in response:

“CBIC (Central Board of Indirect Taxes and Customs) formations have initiated investigations against some gaming companies (including Online gaming companies) located in India as well as abroad,” said MoS Pankaj Chaudhary. “The estimated evasion of GST by these companies works out of Rs 22936 crores, relating to the period April 2019 to Nov. 2022.”

There were questions raised in the Lok Sabha with concerns regarding whether gaming companies have allegedly become routes to launder money. “In these cases, as of 06.12.2022, proceeds of crime of more than Rs 1,000 crore have been attached/seized/freezed under the provisions of Prevention of Money Laundering Act, 2002 (PMLA),” added MoSS Pankaj Chaudhary. Additionally, he explained that 10 Prosecution Complaints (PCs) including two supplementary PCs have been filed before the Special Court, PMLA.

Specific companies have not yet been named as disclosure of specific taxpayers is prohibited except as provided under section 128 of the Income Tax Act, 1961. There is a good chance that the final results of the investigation will reveal the specific companies implicated in this investigation.

As things currently stand, there is not a lot of information available as to the companies involved in GST evasion. It will be interesting to see the results of the investigation and the larger ripple effects it will have across the entire gaming industry of the country. The numbers involved in the investigation are pretty significant so there is a good chance that there will be several companies implicated in this investigation.