Tax Notices Worth INR 1 Lakh Cr Slapped On Online Gaming Firms So Far

Gaming Firms To Approach New Govt After General Elections For GST Reduction

SUMMARY

There is no available data for foreign gaming companies registering in India since the implementation of new regulations on October 1

There are speculations that tax authorities may be applying the amended GST retrospectively

In response to the changing tax landscape, platforms such as Quizzy, OWN, and Fantok have temporarily suspended their operations

Amid the ongoing GST troubles in the real money gaming segment, online gaming companies have been sent show-cause notices for alleged tax evasion to the tune of INR 1 Lakh Cr.

Meanwhile, there is no available data for foreign gaming companies registering in India since the implementation of new regulations on October 1, as per media reports.

“Online gaming companies served notices worth about INR 1 Lakh Cr by GST authorities so far,” the reports said, citing a senior official.

In its effort to enforce tax compliance, the government introduced amendments to the GST law, which now requires overseas online gaming companies to mandatorily register in India beginning from October 1.

The government has also issued a clarification to the states regarding the GST applied to online gaming companies, saying that the tax on these companies is not retrospective.

The need for this clarification arose as certain states, such as Goa, raised concerns and claimed that the 28% GST imposed on online gaming companies was being applied retroactively, which the government has now denied.

Meanwhile, tax authorities have been issuing GST notices to online gaming companies. Earlier, the Directorate General of Goods and Services Tax Intelligence (DGGI), Mumbai Zone, issued a notice of INR 28,000 Cr to the gaming giant Dream11. Prior to that, tax authorities served a notice of INR 21,000 Cr to the parent entity of Games24x7.

It’s important to note that online gaming platforms were paying an 18% GST on the total platform fees previously, as there was a lack of regulatory clarity on the matter. In contrast, betting and gambling activities attracted a 28% GST. With the revised GST rate that came into effect on October 1, all real money gaming platforms are now required to pay a 28% GST on the full face value of bets.

There are speculations that tax authorities might be applying the amended GST retrospectively in these show-cause notices. Many online gaming firms, including the unicorn Dream11, have opted for legal recourse to challenge these notices.

In response to the changing tax landscape, platforms such as Quizzy, OWN, and Fantok have temporarily suspended their operations. In September, Bengaluru-based Gameskraft also decided to shelve its fantasy offering, Gamezy Fantasy.