Nazara Gets INR 2.84 Cr GST Show Cause Notice From DGGI Mumbai

SUMMARY

The company said it has not received the proceeds from the export of certain services and hence the sale of service could not be treated as an export

Nazara said that while there has been a delay in receiving the proceeds from the export of its services, there was no indication that it would not receive the export proceeds

The notice from the DGGI comes amid a wider government crackdown on online gaming companies, which are looking at a total tax demand of INR 1 Lakh Cr

Nazara Technologies has received a GST show cause notice from the Mumbai office of the Directorate of GST Intelligence (DGGI) worth INR 2.84 Cr, the listed online gaming startup informed the bourses on Wednesday (September 27).

The DGGI sent the notice asking why it should not recover the said amount under Section 74(1) of the Central Goods and Services Tax Act, 2017 and Maharashtra Goods and Services Tax Act 2017 along with interest under Section 50 of CGST and penalty under Section 122(2)(b) of the GST Act read with Section 20 of Integrated Goods and Services Tax Act, 2017.

The company said it has not received the proceeds from the export of certain services and hence the sale of service could not be treated as an export. Nazara further argued that since it had not received any payment for the export of the said services, it was responsible for paying IGST at 18% on the value of such services.

“Nazara exported services under a letter of undertaking without payment of GST as per rule 96A of CGST Rules, 2017. As export proceeds have still not been received (on account of a force majeure event) section 2(6)(iv) is not complied, the sale of services can’t be treated as export of services and hence the company is responsible to pay IGST @18% on value of such services,” said Nazara in the filing, explaining the lapse.

Nazara further notified that while there has been a delay in receiving the proceeds from the export of its service, there was no indication to suggest that it would not eventually receive the entire export proceeds.

The SCN issued by the DGGI to Nazara pales in comparison to some of the notices allegedly served to some of the gaming companies in the country in recent days. For instance, Dream11 is said to have received a pre-show cause notice of INR 25,000 Cr, making it the largest case of indirect taxation in the country’s history.

With the industry looking at a black swan event where the government might raise up to INR 1 Lakh Cr in tax demand, much of the future of online gaming in India, especially real money gaming, hangs on the verdict of the Supreme Court in the ongoing tussle between Gameskraft and the Centre.