Online Money Gaming: Hoping for a solution on retrospective GST whether through courts or out of court, says Revenue Secretary

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Union Revenue Secretary Sanjay Malhotra in a post budget interview to CNBC TV18 said he was hopeful of a resolution of issue pertaining to retrospective tax dues in the money gaming sector including by way out of court settlement.

Responding to a query if the department is exploring out of court settlement, he said that the matter is currently in the court but one cannot expect more tax payment than the amount one has perhaps earned. It is worth noting that the tax demands in many cases are few times higher than the revenue that the online money gaming companies generated for the same period.

The statement from top bureaucrat indicates that the government is aware of the fact that it may not be in a position to recover the dues even if there is favorable outcome to the department in the Supreme Court. However, the legal team of the union government before the Supreme Court earlier said money gaming companies cannot cite hardships to avoid tax payment

The Supreme Court has scheduled a final hearing of the pleas challenging retrospective GST demand notices on April 2, 2024. 

The revenue secretary expressed satisfaction on the new regime that came into effect on 1 October 2023 and said the revenue potential was untapped until the new regime. GST collection from online gaming in Nov-Jan period touched rupees 3,470 crore.

The GST Council in its meetings in July and August 2023 had decided to recommend the levy of 28% GST on full face value of bets placed through money gaming platforms and horse racing and casinos which came into effect on 1 October.

The revenue department had claimed that changes are only clarificatory in nature and the online money gaming platforms facilitated betting and gambling by allowing games to be played for stakes and that placing stakes even on skill based games amounts to ‘gambling and betting’ under GST laws and had issued notices to several gaming companies including Gameskraft. The money gaming companies claim that the interpretation of the department would cause hardship to the gaming company as the amount runs several times more than its overall profits.

The department argues that if stakes are placed on an unknown and uncertain outcome, the underlying nature of the game is insignificant and it would amount to betting and gambling.

In a related news, it is reported that the Income Tax Department of India has successfully collected more than Rs 1,260 crore in taxes from online gaming and trading in cryptocurrency during the current fiscal year, following the implementation of a new Tax Deducted at Source (TDS) regime for online gaming and cryptocurrency trading.