Online Gaming money companies whose platforms offer games of skill could face tax liability of over Rs 45,000 crore. It was noted that the Central Board of Indirect Taxes and Customs (CBIC) has assessed the tax liability of such companies, starting from 2017 when Goods and Services Tax (GST) was implemented.
The E-gaming, money generating companies were taxed at 18% on gross gaming revenue due to their skill-based games, instead of the legally prescribed 28%, resulting in a Rs 45,000 crore tax shortfall. The differential tax treatment between skill and chance-based games has been put to an end.
In the recently concluded Monsoon session of Parliament, the amendments to the CGST and IGST laws were passed to bring an end to the different taxation on games of skill and chance. The online gaming companies have paid less than Rs 5,000 crore GST since its implementation in 2017. It has been reported that the gaming industry alone has paid Rupees 45,000 crores less tax since the implementation of GST.
Notably, DGGI had issued a notice to Gameskraft demanding Rs 21,000 crore GST last year in September. However, the notice was quashed by the Karnataka High Court in May this year. The Centre has however filed a special leave petition in the Supreme Court challenging the Karnataka High Court’s decision that revoked the DGGI’s tax demand notice on Gameskraft.
The differentiation of online gaming as either chance-based or skill-based is a debatable issue where some online gaming companies have argued that the services provided by them pertains to skill-based activities thereby warranting an 18% tax rate instead of the 28% rate for chance-based games.
On July 11, the GST Council amended laws to nullify this distinction, mandating a uniform 28% levy on the total bet value. The changes to the CGST and IGST laws has been recently approved and the E-gaming industry has urged for the non-retrospective application of these amendments.
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