GST Notices to Online Games Companies

A government official confirmed on Wednesday that online gambling platforms and casinos have received show-cause notices to recover over ₹1 lakh crore in goods and services tax (GST). However, the amount to be recovered will depend on the Supreme Court's decision regarding the dispute. The official, who requested confidentiality, stated that a GST audit of these companies for the financial year 2018, the first year of the tax's implementation, reveals underpayment of taxes totaling almost ₹1 lakh crore. Since the deadline for serving notices for FY18 was getting closer, several of these notices were placed together in September.

Online Gaming Companies

28% GST on Bets made on online gaming platform

The Official Said “A case pertaining to internet gambling has been determined by the Karnataka High Court. The Supreme Court is having discussions over that case. They will choose a solution for the main problem. The resolution of legal cases will determine the recovery (of the tax demand).” The tax structure was solidified in August when the GST Council made it clear that a hefty 28 percent GST would be applied to the total amount of bets made on online gaming platforms.

The consequences of this most recent action are already clear, as some well-known names in the online gaming industry, such as Dream11 and casino operator Delta Corp, received notices of GST show cause last month. These letters have put these enterprises in a difficult situation because they are the result of suspected underpayment of taxes.

 

GST Evasion of Rs. 21000 Crore

Additionally, GamesKraft received with a show cause notice for alleged GST evasion totaling an unbelievable Rs 21,000 crore in September of last year, in a different high-stakes case. This lawsuit has been an absolute legal wild ride. Even though the Karnataka High Court decided in GamesKraft's favor, it seems the federal government is still fighting, as they filed a Special Leave Petition (SLP) before the Supreme Court in July to try and resolve this divisive matter.

 

The Indian online gaming sector is at a critical crossroads as it attempts to maintain its growth rate while negotiating the complicated rules of changing tax legislation. The government's increased efforts to obtain its share of tax money have put the gambling industry in the sights, leading to a legal battle between gaming corporations and GST authorities. There is little question that the verdict in these court cases would have a significant impact on India's tax system overall as well as the online gaming sector.