SUMMARY
According to the minister, the tax could jeopardise the entire startup ecosystem and might lead to significant job losses and hamper foreign investments
Dream11, Games 24x7 and Head Digital Works alone have received a notice of tax amounting to INR 55,000 Cr.
On September 29, the finance ministry’s revenue department notified the new tax rate via an amendment to the CGST Act, 2017
Ahead of the GST council meeting, Delhi’s finance minister Atishi has joined the growing list of opposing parties for the recently notified 28% GST on online gaming companies.
According to the minister, the tax could jeopardise the entire startup ecosystem, and might lead to significant job losses and hamper foreign investments.
For some context, multiple gaming companies, including the likes of Dream11 and Games 24×7, have received huge pre-show cause notice.
The minister was speaking at a virtual press conference on Saturday (October 7). “The unstable and erratic tax environment will impact not only the online gaming sector, but the entire startup sector,” the minister said.
On 29 September, the finance ministry’s revenue department notified the new tax rate via an amendment to the Central Goods and Services Tax Act, 2017. The amendment comes after the 51st GST Council meeting, on August 2, recommended a tax rate of 28% on gross revenue of online gaming firms.
The GST Council also decided that the tax would be applicable retrospectively, something which the online gaming industry has vehemently opposed.
“…It is very important that these kinds of notices that seek to finish the online gaming industry should be withdrawn. Today the GST Council meeting is taking place. I will bring this to the attention of the GST Council that our tax notices will lead to closure of our online gaming industry and it is important to withdraw these notices,” Atishi added.
She pointed out that the online gaming industry, employing over 50,000 individuals and enjoyed by 400 Mn Indians, is not a luxury akin to betting or horse racing. “From 1 October, 28% tax was to come into force. But before that, the GST Council’s Directorate General of GST Intelligence (DGGI) has sent tax evasion notices to the extent of INR 1.5 Lakh Cr to the online gaming industry,” the minister said.
The minister quoted figures from a Mint report last month. However, an ET report pegged the number at INR 1 Lakh Cr. Since there have been no official statements on the actual tax demand raised, the numbers are varied.
Even so, gaming companies such as Dream11, Games 24×7 and Head Digital Works alone have received a notice of tax amounting to INR 55,000 Cr. The notices represent some of the largest indirect tax demands in Indian history, with Dream11 receiving an INR 25,000 Cr notice alone.
Many of these companies have moved to high courts, but a precedent would be set in the ongoing lawsuit in the Supreme Court between Gameskraft and the Government of India.
