No tweaks to new online gaming taxation regime till SC decision

Experts said that the interim period till the apex court ruling comes will be crucial for gaming companies. (Photo: AP)
Experts said that the interim period till the apex court ruling comes will be crucial for gaming companies. (Photo: AP)

Summary

  • Further hearings on this issue are now expected once the Supreme Court resumes sittings after its summer break in July.

New Delhi: The federal indirect tax body is unlikely to make any changes to the 28% goods and services tax (GST) regime on online money gaming until the Supreme Court gives its final order on a bunch of tax disputes for the period prior to its introduction last October, a person informed about the development said.

As per the decisions of the 51st GST Council meeting last August, ministers were to review the implementation of the tax regime for the online gaming industry after six months of its implementation. This period ends in March but, given that a model code of conduct is now in place in view of the Lok Sabha elections, this review can only happen after the polls. However, a review does not necessarily mean tweaks to the tax regime.

“No further change can be made to the tax regime for online money gaming as the matter is sub-judice. One has to wait for the Supreme Court’s views on the matter," said the person who is informed about the current thinking among central and state policy makers. The review was sought by smaller states like Goa and Sikkim.

Experts said that the interim period till the apex court ruling comes will be crucial for gaming companies. 

“Online gaming companies may face hardships during the interim period till the time they get some relief or stay from either the Supreme Court or the jurisdictional High Court. The moot point before the courts remains on valuation of these services and a ruling on this issue would decide the fate of operation of these companies in India," said Abhishek Rastogi, founder of law firm Rastogi Chambers, who is arguing for the petitioners.

Online gaming firms opposed the 28% GST on the full value of amounts deposited by players for betting, saying it would burden the sector, discourage investments and impact the startup ecosystem. They were earlier paying 18% on platform fees ranging from 5% to 20% of the full face value of bets.

The new regime makes a clear distinction between casual online games and those involving a wager. Only actionable claims offered by ‘online money games’ are subject to the 28% tax on full value of deposits made to the platform. Online money games are those in which the player deposits an amount in the expectation of winning some amount in a game or event.

Online gaming companies were served 71 GST- related show cause notices in FY23 and in the current financial year upto October, minister of state for finance Pankaj Chaudhary told the Rajya Sabha on 5 December. These notices were for an amount of 1.12 trillion. 

The apex court had in September stayed a favourable order a gaming company had received from the Karnataka High Court on the 28% GST. Further hearings on this issue are now expected once the court resumes sittings after its summer break in July.

Emails sent to the finance ministry and to GST Council on Tuesday and to online gaming company Gameskraft Technologies Pvt. Ltd. on Wednesday seeking comments for the story remained unanswered at the time of publishing.

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