40 Online Gaming Firms Likely To Receive Fresh Tax Demand Of INR 10,000 Cr Following 28% GST Decision

Forty online gaming firms are set to receive fresh tax demand notices from The Goods and Services (GST) Tax authorities.

These gaming firms together could be liable for up to INR 10,000 Cr tax demand, ET reported. However, the publication reported, before sending notices, the authorities were awaiting clarity on the GST Council decision.

The Central Board of Indirect Taxes and Customs will initiate action against these 40 firms after the GST council decision of levying 28% uniform tax on full face value as there was legal complexity around the distinction between games of skill and games of chance.

It is to be noted that the GST Council did not differentiate between the skill and chance-based gaming for 28% tax.

In addition, the Centre is likely to file an appeal in the Supreme Court against the Karnataka High court verdict on Gameskraft case. Earlier in May, the Karnataka High Court quashed an INR 21,000 Cr tax evasion notice issued to Bengaluru-based online gaming startup Gameskraft Technology by the Directorate General of GST Intelligence (DGGI).

The order was passed by Justice SR Krishna Kumar, who dismissed the tax body’s argument that a game of skill should be considered as betting and gambling if it is played for money.

While the DGGI sought to levy 28% GST on the betting amount of Gameskraft’s companies – Rummy Culture, Gamezy and Rummy Time, the gaming company argued that rummy is a skill game and hence invites only 18% GST.

Now, the Centre will file the petition once the GST Law will be amended to follow 28% tax.

“The discussion also looked at what is skill-based and what is chance-based. Whatever be the decision on (what) each of the game is – either skill or chance-based, or being both or being neither – is not what we are looking at. We are purely looking at that which is being taxed,” Finance Minister Nirmala Sitharaman said on 28% tax decision.

The government will also amend Schedule 3 of the GST Act to bring online gaming into the actionable claim list. So far, lottery, betting, and gambling were classified as actionable claims but not online gaming.

Fear has gripped the real-money gaming startups following the decision of the GST Council to tax the industry at 28%. As per a few industry executives, the question is no longer about how the move will hurt the gaming industry, rather the 28% tax on full face value will simply make the industry ‘disappear’.