The Uttar Pradesh state government notified an ordinance dated September 30 to implement the new 28% GST rate on online gaming, casinos and horse racing. With this, the north Indian state joined 17 other states to implement the new tax regime by October 1. Notably, the Centre also amended the CGST Act well in time to meet the October 1 deadline which it had set.
As of October 7, 13 other states remained to bring about the required amendments to their GST laws, stated Revenue Secretary Sanjay Malhotra in the post-52nd GST Council meeting press conference on the same day. Meanwhile, Kerala is in the process of approving their ordinance soon, with it being before the cabinet at present.
The lack of uniformity in terms of implementation has created problems as the states which haven’t done so can only levy the 9% rate while CGST will be imposed at 14%. This has created confusion among some of the online gaming companies in relation to their tax liability.
The UP state GST department is reportedly scrutinizing online gaming firms, gathering a host of data to determine their tax liability. Ever since the announcement of the new rate on full face value on initial deposits in July, the companies have been pessimistic about their future in the country as they believe their tax liabilities will increase several fold, making their business unsustainable.
Adding salt to the wounds, the Directorate General of GST Intelligence (DGGI) has been issuing GST show cause notices to several large firms in the space, demanding tens of thousands of crores in retrospective GST dues. However, it is to be noted that Malhotra recently denied terming these notices as based on retrospection.
The effect of the new tax rate has already led to shutdowns and layoffs in the industry, with experts predicting more of the same in the times to come. It remains to be seen what unfolds, whether the industry copes up with the GST matter and thrives slowly but surely, or it leads to its near-complete capitulation.