The Directorate General of GST Intelligence (DGGI) has issued pre-show cause notices to around 12 online real money gaming companies over their tax dues worth Rs 55,000 crore, The Economic Times (ET) reported on Tuesday. Dream11, the gaming unicorn, has reportedly received the largest tax notice for dues worth Rs 25,000 crore.
Notably, a pre-show cause notice is served before the income tax department serves a show-cause notice to the companies to inform them about the quantum of their dues. Other companies, which according to ET, have received the notices include Head Digital Works and Play Games 24*7.
Experts quoted in the report said that the total quantum of all the notices may touch Rs 1 trillion. These notices are being issued after the GST rates for real money games increased to 28 per cent on the total bet placed at the entry level. The change is set to be effective on October 1.
However, the Karnataka High Court quashed the notice, and the revenue department challenged the court’s decision. Early this month, the Supreme Court upheld the High Court ruling and decided to hear the matter later this month or early next.
The Supreme Court’s decision on the matter is expected to set a precedent for investigation in online gaming.
Apart from online platforms, the DGGI is allegedly cracking the whip on casino operators for not paying tax.
Last week Delta Corp received a tax notice for Rs 11,139 crore, along with interest and penalty, for allegedly not paying GST on the gross bet value. According to the company, it will pursue all legal remedies available to it to challenge the action and proceedings.
The new rule has clarified tax will be imposed on the money paid by users to online games, making no distinction between games of skill and chance. This is a bone of contention in most matters.
The new rule also provides a new definition of “online money gaming, ” including games based on skill and chance. Online gaming is defined as “an offering of a game on the internet or an electronic network, and includes online money gaming”.
Despite dissent from a few states, including Goa, Sikkim, and Delhi, the GST Council in its July meeting imposed the highest tax without a vote because most states agreed.
Following this, Parliament cleared the proposed amendment in the Central GST Act.
