Online gaming companies welcome govt’s decision to move TDS applicability date to April 1

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Online gaming companies have praised the government’s decision to enforce tax deducted at source (TDS) on winnings from online games starting from April 1 rather than July 1, claiming that it would lessen compliance burden and avoid potential tax disputes.

According to a top executive at a fantasy sports gaming platform the existence of two different taxation systems in a single financial year would have caused the aforementioned issues. Previously, the deadline for TDS applicability was set for July 1.

“If there’s a different taxation regime for the first three months of the fiscal, and a different one for the remaining nine months, it creates compliance burdens for the companies as well as the consumers,” said the executive as quoted by The Economic Times.

“Also, not all players on the platform decide to withdraw their winnings immediately. They wait for the winnings to accumulate to a certain level before they withdraw. To this extent, clear guidelines will be important on how to levy the tax,” the executive added.

Co-founder of online gaming platform WinZO, Saumya Singh also spoke on the topic saying, “It would have been problematic if the TDS would have been applicable from July as the financial year starts from April 1 and the period from April-June would have been an exposure, and even potentially open to dispute with tax authorities.”

The announcement regarding changes in taxation was done in February during the budget speech by Finance Minister Nirmala Sitharaman. Under the new provision, the minimum threshold of Rs 10,000 for TDS was removed. Further, the tax rate applicable for online gaming net winnings has now been set at 30%.

The government introduced sections 194BA and 115BBJ to tax winnings from online gaming. TDS is addressed in Section 194BA, whereas the tax rate on winnings from online gaming is dealt with in Section 115BBJ.

Rahul Tewari, CFO of Games24x7, said, “These progressive steps reflect the government’s commitment towards a thriving sunrise sector by keeping illegal offshore companies at bay, promote responsible gaming practices and build a sustainable future for the industry in India.”

The CEO of All India Gaming Federation (AIGF), Roland Landers, also spoke on the matter.

“While we await CBDT’s clarifications and guidelines in this regard, we are hopeful that the certainty in taxation offered by the budget announcement will be a huge stimulus for the growth of the online gaming industry,” said Landers.

On the other hand, the firms support the application of GST rate of 28% but they have urged that it should be levied on gross gaming revenue (GGR) only and not on the contest entry amount. The GST Council is likely to take a decision on the matter in its next meeting in June.