Ahead of the planned implementation of the new 28% GST regime for online gaming, casinos and horse racing from October 1, Karnataka government on September 29 passed an ordinance to amend their GST Act to incorporate the new policy.
Karnataka had to take the ordinance route for the purpose as the state legislature is not presently in session and is unlikely to be anytime soon. The government clarified that despite the new GST law imposing taxes on casinos and horse racing it does not overturn the existing ban on them in the state.
Talking to Moneycontrol, Karnataka Commissioner for Commercial Taxes C Shikha revealed that they expect around Rs 1500 crore in taxes. “Karnataka is among the first major states to implement such an ordinance. Only a few states, such as Maharashtra and Haryana, have done so far,” she added.
Meanwhile, Chairman of Central Board of Indirect Taxes and Customs (CBIC), Sanjay Kumar Agarwal stated that the government is completely ready to implement the new GST law starting October 1, however the states need to pass the required bill in their assembly or issue an ordinance by September 30.
Finance Minister Nirmala Sitharaman had also announced implementing the new GST rate by October 1. As of now, many of the states are yet to amend their GST laws. Hence, the implementation date is likely to be postponed.
Even after the new tax regime comes into force, the states are unlikely to expect revenues to rise immediately due to the ongoing retrospective taxation matter. The Director General of GST Intelligence (DGGI) has been issuing tax notices to several online real money gaming companies including some of the biggest ones.
Dream11, Delta Corp, Play Games24x7, Head Digital Works are some of the companies to have received tax notices recently. Not to forget, Gameskraft has received a similar notice last year for a record Rs 21,000 crore and the matter is being examined by the Supreme Court. Currently, there is no way any of these companies can pay the amounts that have been demanded as it is way more than what they have earned in the last few years.
Industry experts believe that either the DGGI will have to take a step back or in case the court favors the payment of taxes, real money gaming companies will be forced to file for bankruptcy.