The Directorate General of GST Intelligence (DGGI) is close to completing its investigation in a dozen of online gaming companies for tax evasion and will soon send out show-cause notices to these on the lines of Gameskraft Technology, sources said.

Bengaluru-based Gameskraft Technology was issued a GST evasion notice of Rs 21,000 crore on September 8, 2022.

“In other online gaming companies, the department is soon completing their investigation and issuing show cause notice to other companies. Show cause notices are being sent to 11-12 companies soon. Amount of evasion is yet to be finalised,” a government official told Moneycontrol.

Though the Gameskraft case is under court proceedings currently, there will be no restraint shown to other online gaming companies while issuing show cause notices. The GST intelligence wing had taken a stand in the case of Gameskraft. So, a uniform stand will be taken as part of ongoing investigation, he said.

The GST Council in its next meeting is likely to discuss taxation of online gaming companies, the key question being to tax the entire winning pot at 28 percent or the net amount after reducing the prize money.

The GST law currently does not provide any definition of games of change and games of skill. Currently, online games attract 18 per cent GST while betting attracts 28 percent tax rate.

The group of ministers’ (GoM) panel on online gaming has suggested 28% rate for all online games, casinos, horse racing, including games of chance and games of skill. The GoM is headed by Meghalaya chief minister Conrad Sangma. It includes Goa panchayati raj minister Mauvin Godinho, Tamil Nadu Finance Minister P Thiaga Rajan, Uttar Pradesh Finance Minister Suresh Khanna and Telangana Finance Minister T Harish Rao.

The ministerial panel on online gaming has, however, failed to reach a consensus on the mechanism to calculate the amount on which GST would be levied.

The online gaming industry has been representing that if the winnings are included under 28 percent GST, the sector will become unviable.

Source: Money Control
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