A government official has said online gaming companies have been served show-cause notices for alleged tax evasions to the tune of Rs 1 lakh crore so far this year.
“The total amount of show-cause notices sent to online gaming companies is around Rs 1 lakh crore,” an official said on October 25.
Some relief
“In the case of online gaming, one case has been decided by the Karnataka high court. That matter is before the Supreme Court. They will be deciding on the core issue. The recovery (of the tax demand) will depend on the outcome of court cases,” said the official.
Tax authorities are unlikely to go for an aggressive recovery drive as they await the Supreme Court decision on 28% GST on online gaming companies, bringing relief to these platforms.
Background
The GST Council, in August 2023 had amended the law to clarify that all online games involving bets, irrespective of skill or chance, will attract a GST rate of 28 percent on the full value of the bets placed, and not on the gross gaming revenue, from October 1.
Following this online gaming companies have been hit by huge tax demands that experts say will likely kill the entire industry altogether.
Companies hit back
“The total income of gaming companies in 2022 was around Rs 20,000-22,000 crore, but the tax demand raised against them is to the tune of Rs 55,000 crore. If the sector’s value is less than the demand raised, then there is a problem,” Sudipta Bhattacharjee, a partner at Khaitan & Co, a legal firm, had said.
He is representing Gameskraft in the Supreme Court on the ongoing Rs 21,000 crore GST matter and several other gaming companies in various High Courts.
Dream Sports, the parent company of Dream 11, has lodged a writ petition in the Bombay High Court contesting a claim said to be around Rs 25,000 crore.
Delta Corp
Delta Corp has been provided a temporary relief from the Bombay High Court in Goa from the show-cause notices it has received from the tax department, pushing the casino major’s shares 5 percent higher at open on October 25.
On September 22 it received a tax notice for Rs 11,140 crore, with its subsidiaries also getting notices for Rs 5,682 crore.
This has had a huge impact on its share price, which is down more than 20 percent in the last one month.
