In the fiscal year 2023-24, India’s Directorate General of GST Intelligence (DGGI) detected a record ₹2.02 lakh crore worth of Goods and Services Tax (GST) evasion. This represents a significant rise compared to the ₹1.01 lakh crore identified in the previous financial year, highlighting the growing challenge of tax evasion in India. What makes this discovery particularly noteworthy is that more than 40% of this evasion came from the rapidly growing online gaming industry, which alone accounted for ₹81,875 crore of unpaid taxes.
Key Sectors Involved in Tax Evasion
Apart from online gaming, several other sectors also played a substantial role in this tax fraud. Banking, financial services, and insurance (BFSI) were major contributors, with approximately ₹18,961 crore in GST evasion. The iron, copper, and scrap industries were also highlighted for evasion, contributing ₹16,806 crore. Additionally, the co-insurance and reinsurance sectors were responsible for ₹16,305 crore of the total evasion detected.
The surge in GST evasion cases coincides with increased efforts by the DGGI to improve its detection mechanisms. The DGGI uncovered around 6,074 cases of GST evasion in 2023-24, a marked rise from the 4,872 cases identified in the previous year.
Online Gaming: The Biggest Offender
The online gaming sector has rapidly grown in India, and with this expansion, it has also become a hotspot for tax fraud. In recent years, the rise of online gaming platforms has posed regulatory challenges, particularly around taxation. The ₹81,875 crore worth of evasion in this sector reflects the complexity of monitoring digital transactions and revenue generated by online platforms.
This is the first time that the online gaming industry has emerged as one of the top sectors in GST evasion. The government has been focusing on regulating this industry, particularly after recent legal interventions and the imposition of a 28% GST on online gaming in August 2023.
Government Crackdown on GST Evasion
The government’s response to the growing issue of GST evasion has been proactive, with the DGGI leveraging advanced technologies such as Big Data Analytics and Artificial Intelligence (AI) to strengthen its monitoring capabilities. The agency also plans to set up five new digital forensic labs across India, in locations such as Gandhinagar, New Delhi, Kolkata, Mumbai, and Chennai. These labs will enhance the DGGI’s capacity to track digital transactions and combat tax evasion more effectively.
In addition to this, there has been a surge in voluntary payments made by businesses caught evading GST. In 2023-24, ₹26,605 crore was voluntarily paid by offenders, up from ₹20,713 crore in the previous year. Authorities also arrested 147 individuals involved in these evasions, a significant increase from 92 arrests in 2022-23.
Conclusion
The detection of ₹2.02 lakh crore in GST evasion during 2023-24 signals a growing problem that demands immediate attention. The fact that over 40% of this evasion came from the burgeoning online gaming industry underscores the challenges of regulating digital sectors. While the government is making strides in combating tax fraud through the use of technology and stricter enforcement, the scale of the problem indicates that further regulatory reforms and enhanced oversight are necessary.
The rise in tax evasion also raises concerns about the impact on India’s economy, as the funds lost to evasion could otherwise be used for public services and infrastructure development. Going forward, the government will need to continue its crackdown on GST evasion, particularly in high-risk sectors like online gaming, to ensure better compliance and safeguard the country’s revenue base
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