Offshore gaming firms are increasingly using crypto to evade tax in India, according to government officials. With online betting and casino platforms booming, many foreign entities are bypassing Indian tax laws by routing payments through cryptocurrencies and avoiding TDS and GST liabilities.
Let’s break down the compliance risks, enforcement challenges, and what Indian taxpayers and platforms need to watch out for.
Why crypto is being used to evade gaming tax
Gaming platforms—especially those hosting casino-style games, card betting, or fantasy sports—require players to deposit money. Ideally, such transactions must attract:
- GST at 28% on the full bet amount (as per Rule 31B & 31A of CGST Rules),
- TDS under Section 194BA of the Income Tax Act for winnings exceeding ₹100,
- Income tax disclosures for winnings under ITR.
However, offshore platforms are:
- Allowing crypto deposits and withdrawals, thereby masking the origin.
- Not deducting TDS on winnings.
- Not registering for GST in India.
- Avoiding FEMA and RBI scrutiny due to untraceable crypto transfers.
Enforcement challenges faced by Indian authorities
Indian regulators are struggling to:
- Track wallets and crypto exchanges used by offshore gaming firms.
- Establish jurisdiction over entities based in tax havens like Curacao or Cyprus.
- Enforce penalties and compliance due to lack of local presence.
This has led to huge losses in tax revenue. CBDT and DGGI have flagged this as a high-risk area.
What the government is doing now
Here’s how India is responding:
| Action | Description |
|---|---|
| Blocking unregistered gaming URLs | As per MEITY orders, many illegal gaming domains have been geo-blocked. |
| Mandating GST registration | Even offshore gaming platforms must register under GST as per Section 22 read with Section 24 of CGST Act. |
| Crypto-VDA traceability | Income Tax Department and FIU-IND are enhancing crypto wallet tracking under PMLA rules. |
| Criminal prosecution | Cases are being filed under PMLA and FEMA for laundering gaming income through crypto. |
| Show-cause notices | Several offshore gaming platforms have been served notices for evasion of GST and TDS. |
One notable development is the Supreme Court hearing in the Gameskraft case, which will decide whether betting platforms can escape 28% GST by calling themselves “skill-based”.
Legal provisions involved
- Section 194BA (TDS on online gaming winnings)
- Rule 31A & 31B of CGST Rules (valuation of supply)
- Section 2(6) of IGST Act – definition of import of service
- Section 22 & 24 of CGST Act – mandatory registration
- FEMA provisions – for cross-border remittances
Expert tip: Don’t assume offshore means no tax
Many Indian users mistakenly think using an offshore app with crypto deposits will keep them safe. But that’s not true:
“Winnings from any platform—foreign or Indian—are taxable in India if the user is resident here. Even crypto winnings are traceable under VDA rules,” says a senior chartered accountant.
What Indian users and platforms should do
- Avoid unregistered platforms — check if GSTIN is valid.
- Disclose crypto winnings in ITR Schedule VDA and Schedule OS.
- Platforms must register for GST even if hosted outside India.
- Maintain proper KYC and ledger tracking if accepting crypto.
FAQs on crypto gaming tax in India
Q1. Are crypto gaming winnings taxable in India?
Yes, for Indian residents, winnings are taxable under Section 115BBJ even if received in crypto.
Q2. Can foreign gaming firms avoid GST in India?
No. If they offer services to Indian players, they’re liable under the CGST and IGST Act.
Q3. Will using VPN or crypto shield me from tax?
No. Tax liability arises from residential status, not location of server or payment mode.
Final takeaway
Crypto tax evasion by offshore gaming firms is on the government’s radar, and both platforms and players are under scrutiny. With new TDS rules, GST demands, and crypto tracking under PMLA, evasion is no longer easy.