A host of online gaming, like Dream11, and casino operator, like Delta Corp, have received GST show cause notices last month for alleged short payment of taxes. File.
| Photo Credit: Reuters

GST authorities have issued show cause notices worth ₹1 lakh crore to online gaming companies for tax evasion so far, a senior official said on October 25.

The official, however, said that there is no data yet of foreign gaming companies registering in India since October 1.

The government has amended the GST law, making it mandatory for overseas online gaming companies to register in India from October 1.

The GST Council had in August clarified that 28% Goods and Services Tax (GST) would be levied on full value of bets placed on online gaming platforms.

“Online gaming companies served notices worth about ₹1 lakh crore by GST authorities so far,” the official said.

A host of online gaming, like Dream11, and casino operator, like Delta Corp, have received GST show cause notices last month for alleged short payment of taxes.

Separately, a show cause notice was sent to GamesKraft in September last year for alleged GST evasion of ₹21,000 crore.

While the Karnataka High Court has ruled in favour of the company, the central government in July filed a Special Leave Petition (SLP) in the Supreme Court.

New Delhi:

The Federation of Indian Fantasy Sports (FIFS) on Wednesday urged the government not to impose a 28% GST on online gaming with retrospective effect, as it is discouraging investors from putting their money into this booming industry.

The GST Council in its meeting in August held that online gaming would attract 28% GST on the face value of bets at entry level. Pursuant to the decision, the GST authorities have sent notices to several online gaming companies for recovery of taxes.

Speaking at the ‘TIOL Tax Congresss 2023’, Federation of Indian Fantasy Sports (FIFS) Director General Joy Bhattarcharjee said the issue of GST rate is more or less settled and the only issue that the industry have is retrospective provision of the law because it is discouraging investors to put in their money into this booming industry,” he said.

“However, retrospectivity of GST provisions is a very difficult blow for us. Having ‘contingent liability’ will spook away the investors whom we need during this growth phase,” he said.

Also, speaking at the occasion, Directorate General of GST Intelligence (DGGI) Principal DG Anil Kumar Gupta said that the government’s intention is not to discourage a rising industry, but to settle an issue lingering for a long time and the government is quite open to looking into the progress after some time. 

“It was not an easy decision… moreover, it will be up for review after six months, wherein depending on the scenario, the government will take a call,” Mr Gupta said.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Union Finance Minister Nirmala Sitharaman with Union MoS for Finance Pankaj Chaudhary and Revenue Secretary Sanjay Malhotra during the 51st Goods and Services Tax (GST) Council Meeting, in New Delhi, on August 2, 2023.
| Photo Credit: PTI

The GST Council on August 2 blinked a little on technicalities and kept the door open for a review down the road, but stuck to its earlier decision to impose a 28% levy on the full face value of bets placed on online gaming, casinos and horse racing, with an eye on implementing it from October 1.

Finance Minister Nirmala Sitharaman, who chaired the Council’s meeting, said the Centre would now strive to amend the Goods and Services Tax (GST) law in Parliament’s current session itself to enable the implementation of the levy, despite dissent from Sikkim and Goa over the modalities of the tax for casino users.

Tamil Nadu Finance Minister Thangam Thennarasu raised concerns about the levy’s impact on the State-wide ban on online gaming, which Ms. Sitharaman said would be addressed in the language of the new norms to explicitly state the tax cannot be levied where a ban is in place.

Also read: Explained | Will 28% GST on online gaming affect its growth? 

Delhi government’s representative sought a fresh review for the online gaming sector, but most other States leaned towards sticking to the Council’s decision last month which had been taken after three years of deliberations, the Finance Minister conveyed after the virtual meeting.

The online gaming industry, which had termed the Council’s decision a death knell endangering billions of dollars of investments and thousands of jobs in the sunrise sector, remained anxious but appreciated a critical clarification on the valuation rules for the 28% levy, approved by the Council on Wednesday.

Simply put, if someone enters a casino by buying chips worth ₹1,000, plays a round and wins ₹300, the tax will not be levied on ₹1,300, but on the entry amount of ₹1,000 alone, Ms. Sitharaman explained. In a joint statement, the E Gaming Federation and Federation of Indian Fantasy Sports welcomed this would address their concerns of “repeat taxation”.

“The new tax framework, while clarifying and resolving uncertainty, will lead to a very burdensome 350% increase in GST and set the Indian online gaming industry back several years. However, it will allow gaming companies a fighting chance to innovate and rebuild the foundation of gaming in India,” they added.

“…Because Goa and Sikkim [who wanted the 28% levy on casino bets to apply on gross gaming revenue and not the entire face value] kept appealing that they were small States and needed consideration, the Council agreed to come back after six months after implementation to review the way in which this is getting implemented,”

Revenue Secretary Sanjay Malhotra hinted the scope of the review will likely be limited to issues about valuation and the tax rates, which can be tweaked through notifications and rules, while the GST law changes will be broader “enabling provisions”.

Apart from the central GST law amendments, States will also have to amend their GST laws for the new tax to kick in, but Ms. Sitharaman expressed hope it can be implemented from October 1.

While the changes will not be retrospective per se, Mr. Malhotra emphasised they are more in the nature of a clarification because betting, gambling and lottery are already included as actionable activities under the GST law.

The Revenue Department believes online gaming, horse racing and casinos are also in the nature of betting only, he said. The High Court of Karnataka has not upheld that stand, dismissing a ₹21,000 crore tax demand against Gameskraft Technologies. “We have filed a special leave petition on the matter yesterday [Tuesday] and whatever the Supreme Court decides, will prevail,” the Revenue Secretary said.