GST Council to discuss key amendment, retro tax relief likely for online gaming companies

71 show cause notices had been issued to online gaming companies for alleged GST evasion, totalling over Rs 1.12 lakh crore.

The GST Council is set to discuss and clarify the scope of a new amendment to the GST Act 2017 aimed at shielding businesses from retrospective tax demands on September 9, a move that could offer relief to India’s real-money gaming industry and other sectors grappling with pending GST dues, an official said.

The council's June meeting recommended Section 11A as a legal safeguard against punitive retrospective tax demands to alleviate financial burdens on industries facing outstanding GST dues potentially.

“The 11A amendment has been passed. Corresponding circular is awaited and a discussion to this effect will be held in the next Council meeting on September 9. The circular will centre on how to apply and interpret the law pending approval from the council,” the official said, requesting anonymity.

Once implemented, it will reduce legal disputes as well.

“The GST Council is expected to exercise powers of Section 11A to reduce litigation woes,” said Ankit Jain, Partner at Ved Jain & Associates. “We’re hopeful that the matter comes up for discussion and a clarification is issued,” he added.

The council’s decision may have major implications for the RMG sector, which has been grappling with significant GST retrospective tax demand pertaining to a period between July 1, 2017 — the day GST was rolled out — and March 31, 2023.

Last December, the finance ministry had said that 71 show cause notices were issued to online gaming companies for their alleged GST evasion worth over Rs 1.12 lakh crore.

Businesses providing corporate guarantees are also hoping for clarity on past tax liabilities.

“Section 11A represents a significant legal development in the GST framework. It offers a crucial safeguard against the punitive application of retrospective tax demand,” SR Patnaik, Partner, Cyril Amarchand Mangaldas, told Moneycontrol.

He emphasised that this provision could resolve disputes involving corporate guarantees, employee secondments, and reimbursements to information technology (IT) and airline companies.

The council's decision could mark a significant step toward reducing litigation and promoting ease of doing business by regularising past trade practices and settling long-pending tax disputes across various sectors.