No GST Relief to Online Gaming Companies: Central Govt

A significant setback to the online gaming companies is that the Centre has no intention of relieving the industry from previous GST demands, the sources confirmed.

The ministry is bounding with its previous stand of taxing 28% online gaming on each bet. The officials stated that the industry already knows about our stand. They want to pay 18% of the gross gaming revenue (GGR) or the platform fee. The law already existed that they needed to pay 28% GST on each bet placed. In addition to that he said, the gaming industry has made various representations on many occasions before the Centre.

It was decided during the 51st GST Council meeting that online gaming would be subjected to 28% GST on the full face value of bets, irrespective of any skill or fortune w.e.f. 1st October 2023.

Gaming companies are in a difficult situation because they were paying GST at the rate of 18% on gross gaming revenue (GGR) earlier, and they received tax demands as per the revised rules.

The finance officials claimed that the earlier law was clear with regard to GST on Online gaming but the experts say the law wasn’t entirely clear about that. After the GST Council’s decision, online gaming companies were served with tax demands of Rs. 1.12 lakh crore in 2023.

The Supreme Court upheld the Karnataka HC ruling quashing GameKraft’s Rs. 21,000 crore GST notice after the revenue department appealed at the Supreme Court against the HC decision in September 2023.

Whether the indirect tax may exceed even the gaming company’s earnings will continue to be a moot question, and the constitutional test will apply from different perspectives, said the tax professional who also believes that to confirm tax demands various statutory and constitutional barriers will have to be crossed in these cases for the prior period when the valuation provisions are being tested.

He stated further that the process of recovery and the system of investigation, if not carried out in a legally authorised manner, may also come into play to save online gaming companies, even if the valuation of the judgement is not in their favour.