Several online gaming firms, especially those operating outside India, are increasingly using cryptocurrency to process transactions to bypass tax obligations, which could amount to thousands of crores, two senior government officials have told Moneycontrol.
Many offshore companies are not registered in India and some among those that are also carry out transactions via cryptocurrency, which helps them conceal transactions and they end up paying a lower tax, the officials said.
“These are not large and prominent online gaming companies. They are much smaller in scale and operate from offshore locations such as Dubai, Cayman Islands, Cyprus, etc,” one of the officials said.
“The Directorate General of GST Intelligence (DGGI) is only able to track 10 percent of crypto-transactions; the rest go undetected,” the other official said, adding the amount going untracked could be to the tune of thousands of crores. Both officials spoke on condition of anonymity.
The Indian gaming industry generated revenue of $3.8 billion in FY24, up 22.6 percent from the previous year. It is expected to cross $9.2 billion by FY29 at a 20 percent compound annual growth rate over the next five years.
An industry source told Moneycontrol that online gaming companies are accepting deposits and disbursing winnings in cryptocurrencies like USDT, bitcoin, or ethereum and not using the Indian banking channels.
“These transactions are routed through unregulated or foreign crypto exchanges that do not follow Indian KYC norms, making it difficult for Indian authorities to track the origin or beneficiary of the funds,” the person explained.
“Often, these companies maintain offshore crypto wallets or use intermediaries to convert INR into crypto through grey-market peer-to-peer platforms or illegal routes.”
Under the GST laws, online gaming firms must deposit 28 percent tax on “full face of bets” placed on their platforms.
Full face value of bets refers to the entire amount (or its equivalent such as chips or tokens) that a player wagers in a game, regardless of whether it’s a game of skill or chance.
In March, a finance ministry release said that around 700 offshore entities involved in the supply of online money gaming/betting/gambling were under DGGI’s scanner. These entities were evading GST by “failing to register, concealing taxable pay-ins, and bypassing tax obligations”, it said.
So far, 357 websites/URLs of illegal/non-compliant offshore online money gaming entities have been blocked by the DGGI, in coordination with Ministry of Electronics and Information Technology (MeitY), the release had said.
Last week, minister of state in MeitY Jitin Prasada told Parliament that the government blocked 1,524 illegal gambling websites and mobile apps between 2022 and June 2025.
Tracking crypto
Experts say government agencies have several tools at their disposal to detect and act against firms using crypto. For instance, the income tax department can initiate search and seizure operations against Indian individuals promoting these platforms and assess undisclosed income.
They can also issue notices for TDS defaults and impose penalties and interest.
Simultaneously, the Enforcement Directorate (ED) can launch investigations under the Foreign Exchange Management Act (FEMA) and Prevention of Money Laundering Act (PMLA) to look into violations related to crypto-based winnings, they say.
The Financial Intelligence Unit (FIU) and the Reserve Bank of India can monitor suspicious transaction reports and direct crypto exchanges to comply with PMLA obligations.
“India can also collaborate internationally under tax treaties, the Common Reporting Standard, to access data from foreign jurisdictions,” an tax expert said.
“Detection of tax evasion through such transactions is easier said than done and therefore it is becoming increasing lucrative for online gaming firms. The most important tool would be to establish some international consensus and co-operation on treatment of such transactions,” another tax expert said.
Another tax expert said the proliferation of online gaming platforms, including numerous unregistered and offshore sites, exposes consumers to heightened risks. “Players may encounter tax evasion schemes, privacy breaches, or outright financial scams,” he said.
E-Gaming Federation CEO said the organisation is in “active dialogue with regulators”, calling for strong enforcement against such non-compliant operators. “We also advocate for a robust whitelisting framework, allowing only those platforms that meet India’s regulatory, ethical, and tax standards to operate,” he said.
