No, it's used, but not in this context: the Italian question isn't about what someone else is saying, but asking the other person to say whether what the speaker just said represents a serious condition/illness. E.g. https://www.repubblica.it/online/cultura_scienze/bucchi/sessanta/sessanta.html: "Da depresso sento che mi mancano enormemente i libri su cui ho studiato all'università. Dici che è grave?" (when I'm depressed I feel that I'm missing enormously the books I studied on in University. Do you think it's serious?)
In my opinion and if the Italian expression is idiomatic the way you translate it shouldn't have to be so rigid. "Tell me, is it serious?" (which is what I wrote) means the same as "Do you think it is serious?" (correct according to Duo) but isn't accepted as a correct answer. Any thoughts on this?
It might sound right, but it's quite the opposite of what the Italian sentence means: it's not a reaction to what someone else is saying, it's a request to say whether something is a problem. The actual translation might be quite far depending on context: e.g. "ho premuto il pulsante rosso, dici che è grave?" I would translate with "I pressed the red button, is that bad?" Or in an exchange like https://twitter.com/Dlavolo/status/531349842157912064 I would translate it with "is it that bad?"
Do you say it is serious ? Is the given correct answer. But I would like to meet the person who would ever say this. They would stand alone while every other English speaking person would say “ Did you say it is serious”