Withdraw tax notices to online gaming industry: Delhi FM Atishi ahead of GST Council meet

  • The 51st GST Council meet, on 2 August, had recommended a tax rate of 28% on gross revenue of online gaming firms

Gireesh Chandra Prasad
Updated7 Oct 2023
The government is in the process of sending out retrospective GST claims as high as  <span class='webrupee'>₹</span>1.5 lakh crore across the entire gaming industry, claiming real-money gaming firms to qualify under gambling.
The government is in the process of sending out retrospective GST claims as high as ₹1.5 lakh crore across the entire gaming industry, claiming real-money gaming firms to qualify under gambling.

New Delhi: Delhi's finance minister, Atishi, on Saturday warned that the recently proposed 28% Goods and Services Tax (GST) on online gaming firms could jeopardize the entire Indian startup sector, potentially leading to significant job losses and hampering foreign investments.

Speaking at a virtual press conference, Atishi emphasized the sector's contributions, highlighting that it has attracted 70,000 crore in foreign investment, with an additional 25,000 crore expected soon. “The unstable and erratic tax environment will impact not only online gaming sector, but the entire start-up sector,” the minister said.

Last month, Mint reported that the government is in process of sending out retrospective GST claims as high as 1.5 trillion across the entire gaming industry, claiming real-money gaming firms to qualify under gambling. Multiple leading gaming firms are in process of receiving these notifications, which are expected to be rolled out by the end of the month.

On 29 September, finance ministry’s revenue department notified new tax rate via an amendment to Central Goods and Services Tax Act, 2017. The amendment comes after 51st GST Council meet, on 2 August, recommended a tax rate of 28% on gross revenue of online gaming firms.

“…It is very important that this kind of notices that seek to finish the online gaming industry should be withdrawn. Today the GST Council meeting is taking place. I will bring this to the attention of GST Council that our tax notices will lead to closure of our online gaming industry and it is important to withdraw these notices,” the minister said.

Entrepreneurs and startups have played a very important role in making Indian economy vibrant and in creating jobs, she said. “Moving forward, our economy needs startups and young entrepreneurs. But unfortunately, on the one hand, we speak about promoting start-ups and policies like start-up India, but on the other hand, GST Council has taken some decisions which go in the direction of finishing our start-up industry’s biggest sector,” Atishi said in a biting criticism of the Council’s decision.

She pointed out that the online gaming industry, currently employing over 50,000 individuals and enjoyed by 400 million Indians, is not a luxury akin to betting or horse racing. Contrarily, many in tier two and three sectors rely on small online games for entertainment.

“From 1 October, 28% tax was to come into force. But before that, GST Council’s Directorate General of GST Intelligence (DGGI) has sent tax evasion notices to the extent of 1.5 lakh crore to online gaming industry,” the minister said.

“You think about this, if an industry which is valued at 23,000 crore as per media reports, is sent tax notices to the tune of 1.5 trillion, the whole sector will get finished. No company which has to pay taxes similar to its valuation will survive,” the minister said.

Citing an example, she referenced a company valued at 19,000 crore that received a tax notice close to 10,000 crore. “What will be the result? The company will not be able to pay the tax. The companies will get closed down. If companies close down, more than 50,000 young people working in these companies will be rendered jobless,” she cautioned.

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