Online gaming firms sent 71 GST show-cause notices worth Rs 1.12 lakh crore

While the online gaming firms feel the 28 percent tax is applicable only starting October 1, the government is of the opinion that the October 1 revision only provided clarity to a law that was already in force.

Online gaming companies have been sent 71 show-cause notices involving the evasion of Goods and Services Tax (GST) worth Rs 1.12 lakh crore in 2022-23 and the first seven months of 2023-24, the Rajya Sabha has been told.

"As these notices are pending adjudication, the respective GST demand is not yet determined under the provisions of CGST Act, 2017," Minister of State for Finance Pankaj Chaudhary told the Upper House of Parliament in response to a written question on December 5.

Moneycontrol reported on October 25 that online gaming firms had been served notices for alleged tax evasions to the tune of Rs 1 lakh crore, so far, in 2023-24.

Chaudhary's reply did not provide company-wise details of the notices but he did say that not a single overseas online gaming company had registered in the country since October.

Online gaming firms are in a tussle over the payment of 28 percent GST instead of 18 percent for the period up to October 1, 2023. While the companies argue that 28 percent tax is applicable only starting October 1, the government is of the opinion that the October 1 revision only provided clarity to a law that was already in force. The government's stance is that the demand for tax dues is not retrospective in nature.

Also Read: Gaming firms facing retrospective taxation in essence, but not in law

The GST Council, in August 2023, amended the law to clarify that all online games involving bets, irrespective of skill or chance, would attract a GST rate of 28 percent on the full value of the bets placed, and not on the gross gaming revenue, from October 1.

Following the decision, online gaming companies have been served with huge tax demands that experts say will likely kill the entire industry.

More broadly, the total GST evasion detected since the start of 2019-20 amounted to Rs 4.46 lakh crore, with only Rs 1.08 lakh crore recovered, the minister said. A total of 1,377 arrests have been made over the same period. The year-wise breakdown is as follows: