Tax Evasion Allegations
About 80 online gaming companies in India are facing tax notices for alleged GST evasion totaling ₹10,000-12,000 crore (10-12 billion INR). This action follows a change in GST rates that is set to take effect on October 1.
New GST Rate
The new GST rate is set at 28% and applies to the total bet placed at the entry level for each gaming session. These gaming companies are accused of not paying this 28% rate on their gross gaming revenue, which includes betting through real-money gaming.
The Directorate General of GST Intelligence (DGGI) is issuing notices based on fresh estimates to online gaming companies operating in India and abroad. The estimated evasion is now over ₹31,000 crore (31 billion INR). Notices are being issued for a tax demand of ₹22,000 crore (22 billion INR), with the remainder in process.
In September 2022, Bengaluru-based online gaming company Gameskraft Technology was slapped with a ₹21,000 crore (21 billion INR) tax claim, which was challenged and is now pending in the Supreme Court.
Supreme Court Involvement
The Supreme Court has stayed the Karnataka High Court's ruling on the Gameskraft Technology case and is set to hear the matter later, which is expected to set a precedent for investigations into online gaming companies.
Tax Notices to Casino Operators
The DGGI is also taking action against casino operators for alleged GST evasion. For example, Delta Corp received a tax notice for ₹11,139 crore (11 billion INR) for not paying GST on the gross bet value.
New GST Rule
The new GST rule clarifies that tax will be imposed on the money paid by users to online games, regardless of whether the games involve skill or chance. This has been a point of contention in the industry.
Definition of Online Money Gaming
The new rule provides a definition of "online money gaming," which includes games based on both skill and chance.
GST Council Decision
The GST Council, despite dissent from a few states, imposed the highest tax rate without a vote. Parliament subsequently cleared the proposed amendment in the Central GST Act.
Implementation and Review
The new rule is set to take effect on October 1, with some states expected to make changes to their laws through ordinances. A comprehensive review of the rule's impact is planned six months after implementation.
The outcome of these actions and court decisions is expected to have significant implications for the taxation and regulation of online gaming in India.