In a potential relief for online gaming companies, the Indian government is reportedly reconsidering its stance on retro goods and services tax (GST) demand notices, according to sources informed CNBC-TV18 on February 7. The government is said to be acknowledging the existential challenges faced by gaming companies if forced to comply with GST demands raised for the period between July 2017 and March 2023.
Government’s Realization and Legal Consultation:
Sources suggest that the government now recognizes the impracticality of imposing unrealistic tax demands on gaming companies and is likely seeking legal opinion to find a resolution to the ongoing tussle with online gaming firms.
Show-Cause Notices and Evaded GST:
Online gaming companies received 71 show-cause notices, involving the alleged evasion of GST worth ₹1.12 lakh crore in 2022-23 and the first seven months of 2023-24, as revealed in the Rajya Sabha last year. Minister of State for Finance Pankaj Chaudhary mentioned in December 2023 that the GST demand is not determined yet, as the notices are pending adjudication under the provisions of the CGST Act, 2017.
Context of the 28% GST on Online Gaming:
The potential softening of the government’s stance comes against the backdrop of the government’s decision in August 2023 to impose a 28% tax on online gaming companies based on the total funds deposited for playing online games. This move led to certain companies, like Mobile Premier League, laying off employees.
Ongoing Dispute and Supreme Court Intervention:
Online gaming firms are currently disputing the payment of 28% GST instead of 18% for the period up to October 1, 2023. While the companies argue that the 28% tax is applicable only from October 1, 2023, the government contends that the October 1 revision clarified a law already in force. The government maintains that the demand for tax dues is not retrospective. The Supreme Court is currently hearing the matter related to GST demands on online companies.
