Delhi Finance Minister Atishi Urges Withdrawal of Tax Evasion Notices Threatening Online Gaming Industry
In a significant development ahead of the Goods and Services Tax (GST) Council meeting, Delhi Finance Minister Atishi has sounded a warning bell about the potential shutdown of e-gaming companies due to the issuance of tax evasion notices totaling a staggering ₹1.5 lakh crore. Atishi has expressed her intent to advocate for the withdrawal of these notices during the 52nd GST Council meeting, highlighting the dire consequences they could have on the industry.
Safeguarding the Online Gaming Industry
Delhi Finance Minister Atishi has voiced her concern about the severe impact that these notices could have on the online gaming industry, which is already grappling with the burden of a 28 percent tax rate. She emphasized the importance of maintaining a stable and predictable tax environment, as an unpredictable one could deter foreign investors from entering the online gaming sector. Such a scenario could have broader implications for the startup ecosystem in India.
Amendments to GST Laws
The 51st meeting of the GST Council, held on August 2, saw the proposal of amendments to GST laws, specifically addressing the 28 percent taxation applicable to casinos, horse racing, and online gaming. These amendments came into effect on October 1, following approval by Parliament during the monsoon session.
Online Gaming Companies and Tax Evasion Notices
However, in recent weeks, several online real-money gaming companies have found themselves on the receiving end of show-cause notices for allegedly evading taxes, believed to be linked to the aforementioned GST law amendments. Notable gaming companies, such as Play Games 24X7 (operator of RummyCircle and My11Circle), received notices for ₹21,000 crore, while Dream11, a prominent fantasy e-sports firm, received a notice for ₹28,000 crore.
According to reports from Live Mint, tax demands totaling ₹1.5 trillion are expected to be issued to online gaming companies, alleging underpayments spanning multiple years.
Concerns Over Retrospective Taxation
One noteworthy concern arising from these notices is their apparent applicability to the period preceding the amendments coming into effect. Tax officials have calculated the dues by applying a 28 percent tax rate to the full value of bets placed.
As this issue unfolds, the online gaming industry and tax authorities must navigate a complex landscape, considering the potential impact on businesses, investors, and the broader digital ecosystem.
