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Centre in no mood to give GST relief to online gaming cos

The ministry is sticking to its previous stand of taxing them at 28% on each bet.

Screenshot 2024 01 18 091656In a major setback to the online gaming companies, the Centre is in no mood to give relief to the the industry in relation to past GST demands, top finance ministry sources confirmed to this paper.

The ministry is sticking to its previous stand of taxing them at 28% on each bet. “Industry is already aware of our stand. They want to pay at 18% on the gross gaming revenue (GGR) or the platform fee. The law already existed that they need to pay 28% GST on each bet placed, being a game of chance,” a top Government official said. He added that the online gaming industry has made several representations before the Centre.

In the 51st GST Council meet, it was decided that 28% GST on the full face value of bets, irrespective of skill or chance, put on online gaming would come into effect from October 01, 2023. The online gaming companies are in a fix because earlier they were paying GST at the rate of 18% on gross gaming revenue (GGR) and they have got tax demands as per the revised rules.

While a top finance ministry official claimed that the earlier law was clear with respect to GST on online gaming, experts say that the law wasn’t very clear on that. Post GST council’s decision, online gaming companies were served with tax demands to the tune of Rs 1.12 lakh crore in 2023.

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

“The moot point of consideration will remain whether the indirect tax could be more than even the revenue of the gaming companies and the constitutional test will come into play for from various perspective”, said Abhishek A Rastogi, founder of Rastogi Chambers, who feels that for confirming the 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.

“The process of recovery, and the mechanism of investigation, in case not conducted in the statutorily prescribed manner, may also come into play to save the online gaming companies, even when the ruling for valuation will not be tilted in their favour”, added Rastogi.

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