Online Gaming Firms Slapped 71 Show Cause Notices Worth INR 1.12 Lakh Cr: Govt

Online gaming firms have been sent 71 show cause notices for alleged evasion of goods and services tax (GST) worth INR 1.12 Lakh Cr in the fiscal year 2022-23 and the initial seven months of 2023-24, the government informed the Parliament.

“71 show cause notices involving GST to the tune of INR 1,12,332 Cr have been issued to online gaming companies during financial years 2022-23 and 2023-24 (up to October 2023),” Minister of State for Finance Pankaj Chaudhary told the Rajya Sabha on Tuesday (December 5).

“As these notices are pending adjudication, the respective GST demand is not yet determined under the provisions of CGST Act, 2017,” the minister added.

Chaudhary did not provide names of the companies which have been issued notices. However, he underlined that no foreign online gaming company has registered in the country since October.

It is pertinent to note that besides facing financial and other troubles after the implementation of the new GST regime for real money gaming in October, online gaming firms have also been receiving show cause notices from the tax authorities for alleged GST evasion.

Under the new regulations, a uniform 28% tax will be applied on the full value of bets placed in online games, regardless of whether it involves games of skill or chance.

For instance, if a player wagers INR 100, the new tax regime will levy a GST of INR 28 on that amount. In contrast, under the previous tax system, only an 18% GST was applicable and that too on the platform fee charged for games of skill.

Just over two months back, the Directorate General of Goods and Services Tax Intelligence (DGGI), Mumbai Zone reportedly issued an INR 28,000 Cr GST notice to online gaming startup Dream11. Prior to that, the parent entity of Games24x7 received a notice amounting to INR 21,000 Cr from tax authorities.

Amid this, the union government clarified to the states that the 28% GST is not being levied retrospectively on these platforms. The Centre said that online gaming has always attracted 28% GST and as such the tax notices are not retrospective in nature.

Meanwhile, the new GST regime has dampened the growth forecast for the Indian gaming industry. In a recent report, gaming-focused venture capital firm Lumikai revised the revenue projections for the Indian gaming industry from $8.6 Bn to $7.5 Bn by 2027 due to recent tax changes in the sector.

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