K’taka Tax Dept Writes To 161 Online Gaming Platforms To Comply With Revised 28% GST Rate

Tax authorities in Karnataka have reportedly shot off a letter to 161 online gaming platforms directing them to deduct GST at 28% of the full face value of the bets beginning this month (October 1). 

A senior official of the tax department told The Economic Times that the letter has been written to ensure that gaming platforms collect GST at the newly specified 28% rate as against 18% previously. 

As per the report, the letter has also been written to direct gaming companies to file returns as per the revised rate for the month of October. 

“We have done this to be doubly sure that they collect taxes as per the new rate diligently, and not continue with 18% GST as before. We don’t want any company to claim later that they were not aware of the details of the recent amendments to the GST laws,” a senior official told the publication.

This comes nearly a week after the state notified an ordinance that amended the state GST law to impose the 28% GST tax regime on online gaming in the state. Online gaming companies will have time till November 20 to file their GST returns at the new revised rates for transactions undertaken in the month of October. 

It is pertinent to note that the state commercial taxes commissioner C Shikha earlier said that the new GST rates will enable the tax authorities to generate INR 1,500 Cr in revenues. 

The move comes months after the GST Council in July agreed to levy tax at the rate of 28% on online gaming platforms. Subsequently, the union government also fortified the recommendations by amending the Central and Integrated GST laws after approval from both houses of the Parliament. 

However, the amendments and the higher tax rate, which came into effect from October 1, have been criticised by the gaming industry and saw fervent opposition from industry stakeholders. Subsequently, many firms such as gaming giant Mobile Premier League (MPL) and web3 gaming platform Hike resorted to mass layoffs. 

On the other hand, startups such as Quizzy, OWN, and Fantok have temporarily shut their operations while they formulate the path ahead to deal with the mounting tax burden.  Last month, Bengaluru-based Gameskraft pulled the plug on its fantasy offering, Gamezy Fantasy.

Meanwhile, tax authorities have also begun sending GST notices to online gaming companies. Just a day ago, the Directorate General of Goods and Services Tax Intelligence (DGGI), Mumbai Zone issued an INR 28,000 Cr GST notice to Dream11 and INR 21,000 Cr notice to Games24x7’s parent entity. 

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.