Central and state GST officials are said to be reviewing the grievances raised by online gaming startups since last year
The upcoming GST Council meetings in June or July could see further clarity on the concerns raised by online gaming companies
The clarity on 28% GST on user payments for real money gaming has led to tax notices amounting to INR 1.12 Lakh Cr as per reports
The Goods And Services Tax (GST) Council is reportedly looking to review the concerns raised by online gaming startups in light of the clarity on GST and its implementation last year.
Central and state GST officials are said to be reviewing the grievances raised by online gaming companies that have requested relief from tax notices issued up to October 2023, amounting to over INR 1.12 Lakh Cr across 71 cases, according to a Mint report.
Reports further claim that under GST laws, the penalties could match the total tax amount specified in the notices, potentially doubling the costs for startups.
“Officials are examining the plea made by online gaming companies about the tax notices. It will be considered by the GST Council at its next meeting, which could either be at the end of June or early July,” one official was quoted as saying.
While the central government clarified that 28% GST rate would be applicable for player entry fees on online gaming from October 1 last year, startups had taken their concerns to the Supreme Court.
However, the GST Council now plans to consider the impact of the tax demand on the industry’s viability. It must be noted that reports earlier claimed the council would retain the 28% GST in the June meeting.
Until last October, online gaming did not have a specific tax rate, and companies typically paid 18% GST on the platform fee or commission they took from the money pooled by users.
However, last year, the GST Council clarified that 28% GST would be charged on the entry fees paid by users, which significantly increased the tax outlay for gaming startups. The 28% tax is applicable on the full value of bets placed in online games, regardless of whether it involves games of skill or chance.
Monthly GST collections from online gaming platforms have reportedly soared more than 400% since the change.
It also resulted in a drop in online gaming engagement as well as the GST rates made it costlier for users to participate in games such as fantasy cricket, rummy and other games of skill that come under the real money gaming umbrella.
Several online gaming startups, including Gameskraft, Delta Corp and others received notices to pay INR 1.12 Lakh Cr GST, following which many have moved courts challenging the tax notices.
Complicating matters is the fact that the tax is likely to be applied retrospectively in some cases, which would severely dent the finances of smaller online gaming companies.
