Let us not resurrect the ghost of retro taxation
SummaryThe Centre’s argument of its GST law tweak this year being clarificatory in nature may not suffice to defend what looks like retrospective taxation. We must not revive that inequity
In July, the Goods and Services Tax Council settled an argument over the GST slab applicable to online casinos and gaming platforms and on what sum this tax should be levied. A rate of 28% on the full sums staked by customers was a blow to the business model of these firms, which wanted only their own fees charged, but it was plainly a pragmatic call. The activity does have the air of a luxury, regardless of skill versus luck distinctions, and business inflows are easy to track for tax assessment. A legislative change was made in August to formalize that decision, following which India’s biggest platforms offering those services have been slapped with tax demands hugely out of proportion to their recorded revenues. The notices that some companies received have eye-popping sums. By one estimate, the industry will eventually be asked to cough up a total of about ₹1.5 trillion, including penalties for late payment. Where tax bills exceed what the very enterprises are worth, these businesses stare at closure. It is hardly a surprise that legal challenges are being mounted to keep these bills at bay.