GST summons issued to Online Gaming Companies for Cashbacks Offered to Players

The Directorate General of GST Intelligence (DGGI) has issued new summons to online gaming companies, including Delta Corp, inquiring about cashback payments made to players beginning in October.

The agency discovered reimbursements of taxed money to players as cashback in a separate promo account by online gaming companies following the implementation of the 28% GST on the entire entry-level betting amount.

The DGGI of Gurgaon has issued a summons for the period of October 2023 to June 15, 2024.

“Investigation discovered that real money gaming companies were offering cashback to players in their promo accounts for which summons had been sent,” a person familiar with the notices said. He further clarified that these were new summons, unrelated to previous tax issues.

“Multiple companies are being investigated,” the individual added, declining to provide specifics.

A player typically has three accounts: a deposit wallet, a payment wallet, and a promotional wallet. These companies were distributing cashback to gamers’ promotional wallets.

In August, the GST Council stated that 28% GST was applicable to online gaming and that the tax would be paid on entry-level bets on online gaming platforms rather than what players pay in each game from their winnings. The amendments were implemented on October 1, 2023. Cashback should not be subject to GST, according to legal experts.

The GST Council was supposed to determine the tax on online gaming after six months, but in its last meeting, the review could not be taken up.

Gaming enterprises face tax demands of almost Rs. 1.14 lakh crore, with appeals pending in several courts.