The Director General of Goods and Services Tax Intelligence (DGGI) has issued the heftiest tax notice since the implementation of Goods and Services Tax (GST) to the Bengaluru-based online gaming company, i.e., Gameskraft Technology (GTPL), for allegedly evading GST on the betting amount.
The DGGI accused company of not paying GST of Rs 21,000 crore from July 2017 to June 2022. It has been alleged that the GTPL provided back-dated invoices to the tax authorities to evade taxes. Also, GTPL is accused of promoting online betting through casual, card and fantasy games like Gamezy, Rummy Culture and Rummy Time.
The department has levied 28% GST on the betting amount of approximately Rs 77,000 crore. They have alleged that GTPL has allowed its clients to place bets in the form of money on online games. However, it was not issuing any invoice to its customer for the betting amount. Also, GTPL is alleged to push its customers to continue betting as there was no chance to return the money once it is added to the wallet.
The company replied that:
- The games of skill are a constitutionally protected activity based on rulings from the Supreme Court and various high courts.
- Rummy is one such game declared to be a skill game, such as fantasy games and horse racing.
- They feel that the notice is a departure from the well-established law of the land.
- They have discharged the GST and income tax liabilities as per standard industry practice.
- They are confident of responding to the notice since the authorities applied a 28% tax to games of chance and lottery instead of 18% to online platforms of games of skill.
This action has come at a time when the GST Council is examining the taxation of online gaming and has formed a Group of Ministries (GoM) to suggest the matter. The Council is expected to meet next month to take up the panel’s report on the issue.
The GoM has yet to decide on a GST rate for online gaming, casinos and horse racing. Also, it is analysing whether online games of skill should be treated differently from games of chance. The GoM had earlier recommended a 28% GST on gross gaming revenue for online gaming. Still, it sought more time to submit its final recommendations to the Council.
For any clarifications/feedback on the topic, please contact the writer at dvsr.anjaneyulu@clear.in
DVSR Anjaneyulu known as AJ, is a Chartered Accountant by profession. Loves to listening to music & spending time with family and friends.
