Centre notifies rules to implement 28% GST on online gaming from October 1

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The decision to implement 28% GST on full face value of initial deposits on online gaming, casinos and horse racing was taken at the 51st GST Council meeting on August 2 with the date of implementation being finalized as October 1. Ever since that the states have been working to bring the necessary amendments to their state GST laws but many of them are yet to do so.

The Union Government notified the amendments in the Central Goods and Services Tax (CGST) and Integrated Goods and Services Tax (IGST) for the purpose on Friday, September 29. The amendments, according to the notification, may be called Central Goods and Services Tax (Third Amendment) Rules, 2023.

Apart from a dozen states including Goa, Madhya Pradesh, Gujarat, and now Karnataka, many other states are yet to pass the GST amendment bill or an ordinance implementing the same.

Online real money gaming firms receive tax notices amounting to crores

The new tax rate, however, is not the only thing online real money gaming companies have to worry about as a number of them have received tax demand notices from the Directorate General of GST Intelligence (DGGI) recently. These notices amount to crores of rupees in retrospective taxes.

This came after the current development in the Gameskraft show cause notice case which was dismissed by the Karnataka High Court in May. However, in a recent move, the Supreme Court put a stay on that verdict after the DGGI filed a plea.

As a result, many other gaming firms have now been receiving these tax notices including Dream11 for Rs 1,221 crore, Play Games 24×7 for Rs 20,000 crore, among others. Many more are expected to receive one soon.

Talking about the recent tax notices, Agarwal said, “Showcause notices are going as per legal provision…the government has taken a uniform stand in terms of interpretation of law and accordingly notices have been issued.”

“It is difficult to say as there are many companies and in that case data is being collected. Wherever data has been received, the department has issued showcause notice,” he added

The current total amount demanded by GST authorities has crossed the Rs 50,000 crore mark and experts believe that it is very likely to cross Rs 1 lakh crore as well. In case the Supreme Court verdict is in favor of DGGI, online gaming firms will be forced to file for bankruptcy, leading to a collapse of a major part of the gaming sector.

Amidst all this, the GST Council has decided to hold its 52nd meeting on October 7 which is likely to discuss the rollout of the new GST amendments.