Delhi Finance Minister Atishi on Saturday said the issuance of tax evasion notices totaling ₹1.5 lakh crore to online gaming companies could potentially cripple them. She expressed her intention to appeal for the withdrawal of these notices during the 52nd meeting of the Goods and Services Tax (GST) Council today.
“Valuation of online gaming companies is ₹23,000 crore while ₹1.5 lakh crore tax evasion notices were sent to companies of the online gaming industry. I will seek a withdrawal of tax notices in today’s GST council meeting,” said Atishi, PTI reported.
She argued that retracting these notices is essential to safeguard the industry which is “already facing adverse effects of imposition of a 28 per cent tax.”
She added an “unstable and erratic tax environment” could discourage foreign investors from entering the online gaming industry, thereby affecting the overall startup ecosystem in the country.
In its 51st meeting held on August 2, the GST Council, chaired by the Union Finance Minister Nirmala Sitharaman and comprising state ministers, had proposed amendments to the GST laws. These amendments “clarified” the 28 per cent taxation on casinos, horse racing and online gaming, specifying that the tax applies to the full value of bets placed rather than the gross gaming revenue. These amendments post-approval by Parliament in the monsoon session became operational on October 1.
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However, in recent weeks, several online real-money gaming companies have received show-cause notices for allegedly evading taxes, believed to stem from these GST law amendments.
For instance, the Directorate General of GST Intelligence (DGGI) reportedly sent notices for ₹21,000 crore to Play Games 24X7, which operates RummyCircle My11Circle, while fantasy e-sports firm Dream11 also received a notice for ₹28,000 crore.
According to a Live Mint report, authorities are going to issue tax demands of as much as ₹1.5 trillion cumulatively from online gaming companies for alleged underpayments for several years.
While these amendments have become operational this month, the notices appear to pertain to the period preceding the amendments. Tax officials are reported to have calculated the dues by applying a 28 per cent tax to the full value of bets placed, as per a Money Control report.