Karnataka IT minister criticizes Centre for sending retrospective tax demand notices to online gaming firms

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Karnataka IT minister Priyank Kharge criticized the Centre for sending GST demand notices to online gaming firms with retrospective effect. After the announcement on July 11 to levy 28% GST on the sector and the Supreme Court staying the Karnataka High Court’s order quashing the Rs 21,000 crore show cause notice to Gameskraft, a spate of notices have been issued to several other companies demanding thousands of crores as well.

The new GST regime has come into effect from October 1 and in the 52nd GST Council meeting on October 7 the issue of 28% tax and show cause notices was not deliberated upon. In light of the above, Kharge expressed his displeasure in a media interaction on Wednesday, October 11.

“This was definitely not the relook the people (gaming sector) expected from the finance minister. The gaming industry wants to be regulated, but not like this. More importantly, even after suggesting that the 28% GST will be relooked into prospectively, they have done it now retrospectively. I don’t know if people at the helm of affairs in Delhi are trying to understand the problem or adding to the problem,” said Kharge as quoted by The Economic Times.

Notably, the minister clarified that he was not in support of betting and explained that online gaming is the antithesis of that. He also stated that there is a difference between skilled-based games and chances-based ones and due to the recent developments his state as become a ‘loser’.

Kharge had written a letter to the Finance Minister Nirmala Sitharaman recently in which he mentioned that the online gaming sector has led to the emergence of a large number of unicorns, especially in Karnataka. The recent developments, therefore, have jeopardized Bengaluru’s reputation as a start-up hub. He stressed that it becomes paramount to provide a favourable tax regime to the online gaming industry as per the guidelines notified by MeitY.

“(The GST Council’s decision has) significant ramifications for the sunrise industry in the state, hindering innovation, dampening FDI and stymying the growth of the industry,” Kharge added.

Meanwhile, the state notified the new GST rate on the sector on September 29, bringing it into force from October 1 along with the Centre. The state government also wrote to 161 online gaming firms, communicating them the new tax rate and their obligations to comply with them.