40 online gaming companies likely to receive notices for GST evasion: Govt officials

The other companies had also allegedly promoted online betting through money games and evaded paying 28 percent tax.

About 40 online gaming companies are likely to soon receive show-cause notices from the Goods and Services Tax (GST) authorities for alleged tax evasion after the Supreme Court stayed a Karnataka High Court judgment, quashing a GST notice against Gameskraft Technology Private Limited (GTPL) for alleged tax evasion to the tune of Rs 21,000 crore, two senior government officials said.

The Supreme Court (SC) stay came on September 6. The Karnataka High Court (HC) had issued the judgment in May 2023.

The notice to Bengaluru-based online gaming company GTPL is the biggest such claim in the history of indirect taxation. A GST intelligence unit had issued the show-cause notice to Gameskraft Technology in September 2022.

GTPL is among the 40-odd companies being investigated by the Directorate-General of Goods and Services Tax Intelligence (DGGI) now for alleged tax evasion.

“We should see a horde of show-cause notices. The GST authorities were trying to send the notices to other online gaming companies but the Karnataka High Court order came in. But now the notices will be issued on the same principle,” a senior government official told Moneycontrol.

Since the activities of Gameskraft and other gaming companies are identical, the GST authorities had decided to hold back the show-cause notices after the HC order, he added.

The other companies had also allegedly promoted online betting through money games and evaded paying 28 percent tax between 2017 and June 30, 2022.

According to Additional Solicitor General N Venkatraman, the Central Board of Indirect Taxes & Customs (CBIC) had put a pause on at least 35 show-cause notices to online gaming companies after the HC’s judgment.

The department has, so far, sent three show-cause notices -- the Rs 21,000 crore tax evasion notice to Gameskraft, and Rs 3,000 crore tax evasion notice to two other gaming companies.

“Show-cause notices will be issued to other companies also. The SC has allowed it. The DGGI is continuing its investigations against other companies also,” the other senior government official told Moneycontrol.

After Gameskraft received the notice in September 2022, it approached the Karnataka HC. In May 2023, the HC quashed the show-cause notice and observed that the department was picking and choosing its arguments.

The Directorate of Revenue Intelligence of GST appealed against this judgment in the SC.