Online gaming platforms face Rs 45,000-crore tax demand

Real money gaming players had been paying 18% on gross revenue by citing their services as games of skill.

Online gaming players that are promoted as platforms providing games of skill may have to cough up Rs 45,000 crore as additional tax liability, a newspaper report has said.

The Central Board of Indirect Taxes and Customs (CBIC) has reviewed the pending goods and services tax (GST) liabilities of such entities since the implementation of GST in 2017 as they paid 18 percent tax on their gross gaming revenue, instead of 28 percent prescribed under the law for the games of skill, the Economic Times reported, citing officials who refused to be identified.

It is, however, not clear whether the companies will be levied at 28 percent from July 1, 2017 or from July 11, 2023 when the taxation gap between games of skill and those of chance was levelled off at 28 percent. Moneycontrol couldn't verify the report independently.

“Our internal assessment says that the gaming industry alone has paid Rs 45,000 crore less tax since the implementation of GST,” the financial daily quoted a senior official from CBIC as saying.

The Directorate General of GST Intelligence (DGGI) is likely to issue notices to these companies soon.

Also Read: Real-money gaming sector offers formula to resolve 28% GST woes

While the online gaming industry, which is controlled by real money gaming entities to the extent of around 77 percent, has paid less than Rs 5,000 crore in GST since 2017, the actual tax liability is pegged at more than Rs 50,000 crore, the report mentioned.

This also includes offshore gaming companies, which have dodged more than Rs 12,000 crore in taxes as well as the Rs 21,000 crore demand issued to Gameskraft.

Earlier this month, the Centre filed a special leave petition in the Supreme Court appealing against the Karnataka High Court ruling quashing the tax demand notice of the DGGI imposed on Gameskraft.

Also Read | Explained: GST Council’s 28% tax on India’s real-money gaming sector

“The latest CGST amendment has made the position very clear in terms of the GST liability of online gaming companies. Every online money gaming company will attract 28 percent GST and has to pay the balance tax,” the official told the daily.

On July 11, the GST Council decided to amend the GST laws, giving clarity that no differentiation would be made on whether the games required skill or were based on chance and that 28 percent would be imposed on the full face value of bets.