GST officials have issued notices amounting to Rs 1 lakh crore to various online gaming enterprises, alleging tax evasion, as reported by Reuters. The controversy began in August of this year when the Goods and Services Tax (GST) authority imposed a 28 per cent tax on online gaming companies, applicable to the total funds deposited for online gaming. Notably, Delta Corp, a prominent player in the gaming industry, found itself in the crosshairs last week when it received a GST notice for purportedly underpaying taxes, a sum totalling Rs 6,384 crore.
This latest notice brings Delta Corp's cumulative tax liability to over Rs 23,000 crore. The preceding month saw the company served with a show cause notice regarding alleged tax underpayment of Rs 16,800 crore.
Other Firms Under GST Radar
Joining Delta Corp in the spotlight, other online gaming firms such as Dream11, received GST show cause notices this month for similar accusations of tax underpayment.
In a separate incident, GamesKraft received a show cause notice in September of the previous year for alleged GST evasion, a staggering Rs 21,000 crore.
The Finance Ministry, in a significant move, set October 1 as the date for the enforcement of amended GST law provisions aimed at taxing the e-gaming, casino, and horse racing industries.
The GST authority emphasises that these revisions to the Integrated Goods and Service Tax will mandate offshore online gaming platforms to register within India and adhere to domestic tax regulations.
Under the most recent changes to the Central GST Act, online gaming, casinos, and horse racing are now categorised as "actionable claims," akin to lottery, betting, and gambling, and are subject to a 28 per cent GST rate based on the full face value of bets.
Union Minister Rajeev Chandrasekhar recently outlined the potential economic impact of the artificial intelligence and online gaming sectors, suggesting they could contribute up to $300 billion to India's GDP by 2026-27.
Responding to concerns raised by the online gaming industry regarding high taxation, Chandrasekhar emphasised that the government recognises the importance of "permissible and legally acceptable" online gaming opportunities for young individuals. However, he also noted that certain entities within the gaming sector have exploited the internet, warranting a crackdown. Chandrasekhar assured that a framework for online gaming has been finalised and is gradually being communicated across the government.