The DGGI has sought details from multiple online gaming companies for the cashbacks offered between October 1, 2023 and June 15, 2024
The directorate is said to have detected reimbursements of taxed money back to players as cashback in a separate promotional account by online gaming companies
Last week, a report said that more than 50% of online gaming companies in India witnessed stagnant or declining revenues post the implementation of the 28% GST regime
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The Directorate General of GST Intelligence (DGGI) has now reportedly sought details of the cashback given by online gaming companies to their users since the 28% goods and services tax (GST) regime came into effect on October 1, 2023.
The DGGI has sought information in this regard from the likes of Delta Corp, which owns Adda52.com, and others for the period between October 2023 and June 15, 2024, the Economic Times reported.
The report said that the directorate detected reimbursements of taxed money back to players as cashback in a separate promotional account by online gaming companies. The agency noted that these reimbursements were made post the implementation of the 28% GST on online gaming.
For the uninitiated, an online gaming player typically has three accounts — a deposit wallet, a payment wallet and a promo wallet. The companies, in question, were transferring taxed money as cashback in the promotional wallet of these players as cashbacks are not subject to GST.
“Investigation detected that the real money gaming companies were offering cashback to the players in their promo account for which summons had been sent,” a source was quoted as saying.
As per the report, multiple gaming companies are being probed in connection with the matter. It added that the fresh summons is unrelated to the tax demand notices sent to these companies in the past.
In 2023, the GST Council announced the imposition of a 28% GST on online real-money gaming on the full face value of the bets. Despite criticism from multiple quarters, the Centre went ahead with the proposal and passed amendments to the Central Goods and Services Tax (Amendment) Bill, 2023 and the Integrated Goods and Services Tax (Amendment) Bill, 2023 in August last year.
The mandates came into effect from October 2023. Right after that, authorities began sending tax notices to several online gaming startups, including Dream11, Gameskraft and Delta Corp, totalling INR 1.12 Lakh Cr.
Many gaming companies have since moved the courts and urged the Centre to reconsider the mandates. The GST Council was expected to review the 28% tax regime last week during its meeting last week, but the issue did not feature on the meeting’s agenda.
Meanwhile, online gaming startups continue to seethe under the impact of the new tax levy. As per a report by EY and US-India Strategic Partnership Forum (USISPF), more than 50% of online gaming companies in India witnessed stagnant or declining revenues post the implementation of the new levies.
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