GST on Online Gaming: Law Committee of GST Council recommends GST Amendment to quash Retrospective Demands

Retrospective Demands of Goods and Services Tax on Gaming Industry at 28% of Face Value had shaken the Online Gaming Industry
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The law committee of the Goods and Services Tax ( GST ) Council has proposed a significant amendment to the GST Act, aiming to address cases where low tax payments were due to interpretation issues or lack of clarity.

If approved, this recommendation could provide substantial relief to numerous industries, particularly the online gaming sector, which has been seeking respite from retrospective tax notices.

The proposed amendment involves introducing a new Section 11A to the Central Goods and Services Tax (CGST) Act, 2017. This new section would empower the central government to “not recover the GST not levied or short-levied as a result of general practice.”

This change is expected to lead to the cancellation of numerous tax notices issued to the online gaming industry. However, the amendment does not offer relief for overpaid taxes, meaning companies cannot claim refunds for any excess GST paid due to these practices.

Under the new GST regime, despite best enforcement efforts, the illegal offshore betting industry will continue to grow at 20% at the least, leading to a tax loss figure of Rs 6,72,205 crore by 2026 as per a report by Think Change Forum.

The GST Council, chaired by Finance Minister Nirmala Sitharaman, will convene on June 22 after an eight-month hiatus. The council is also expected to review the implementation of the 28% GST on the online gaming sector.

In the fiscal year 2023-24, the Directorate General of Goods and Services Tax Intelligence ( DGGI ) detected 6,323 cases of tax evasion totaling Rs 1.98 lakh crore, with the online gaming industry accounting for over Rs 1 lakh crore of this amount.

Key Points:

– The GST Council Law Committee recommends new Section 11A to the CGST Act, 2017.

– Amendment aims to prevent recovery of GST not levied or short-levied due to common practices.

– Significant relief expected for the online gaming industry from retrospective tax notices.

– No provision for refunds on overpaid taxes in the proposed amendment.

– GST Council meeting on June 22 to also review 28% GST on online gaming.

– DGGI detected Rs 1.98 lakh crore tax evasion in FY 2023-24, with online gaming companies leading in evasion notices.

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