Real money gaming platforms could face Rs 45,000 crore retrospective tax demand

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The Directorate General of GST Intelligence (DGGI), based on Central Board of Indirect Taxes and Customs (CBIC) assessment, is now planning to recover Rs 45,000 crore from online real money gaming (RMG) companies as taxes. Officials claim that RMG companies have paid only 18% GST on gross gaming revenue instead of 28% since 2017 when the GST law came into effect.

The tax rate for the skill-based game category was prescribed as 28%. Speaking to The Economic Times, a senior official said, “Our internal assessment says that the gaming industry alone has paid ₹45,000 crore less tax since the implementation of GST.”

In September last year, Gameskraft was handed a showcause notice by the DGGI demanding Rs 21,000 crore in tax dues. However, it was recently quashed by the Karnataka High Court which ruled that the games provided by the platform are skill-based ones and do not amount to gambling as claimed by the DGGI.

But it seems that Gameskraft, and the online RMG companies on the whole, are not out of the woods yet as the Centre has filed a special leave petition in the Supreme Court against the Karnataka HC order.

“The latest CGST amendment has made the position very clear in terms of the GST liability of online gaming companies. Every online money gaming company will attract 28 percent GST and has to pay the balance tax,” the official added.

Prior to the changes in the GST rate, online gaming companies claimed that their offerings amounted to games of skill, thus attracting 18% GST. However, on July 11 this year the GST Council announced that online real money gaming will be taxed at 28% on full face value and no distinction will be made between skill-based and chance-based games.

The decision was further clarified on August 2 when the Council revealed that the valuation method will involve taxing the initial deposits of the players. The amendments to the IGST and CGST laws have been approved after the Bills concerning them were passed in the Parliament during the monsoon session last week. They are now awaiting the President’s assent.