29.03.2024: Online gaming tax review unlikely to be taken up by GST Council until SC clarity on retrospective dues

After the conclusion of the 51st GST Council meeting in August last year, all eyes were on the anticipated review of the 28% GST on initial deposits impacting the casino and online real money gaming sector, six months post its implementation from 1st October, 2023. However, with the upcoming Lok Sabha elections and the enforcement of a model code of conduct, any possibility of review has been deferred at least until mid-June, until after the polls and swearing-in of the new government.

As reported in Mint, people familiar with the matter within the government suggest that due to ongoing legal proceedings, amendments to the tax framework governing online money gaming are currently off the agenda. The issue of whether online gaming and casino companies have to pay retrospective dues from 2017 onwards amounting to thousands of crores at 28% of face value of bets or entry fees remains pending before Supreme Court, with final hearings in the matter expected to take place later this year.

Online gaming entities have expressed opposition to the 28% GST imposed on the entire value of player deposits, contending that it imposes undue strain on the sector, dampens investment, and stymies the startup ecosystem. Previously, they were subjected to an 18% tax on platform fees ranging from 5% to 20% of the total bet value.

During the fiscal year 2023, online gaming companies encountered 71 GST-related show cause notices, as disclosed by Minister of State for Finance Pankaj Chaudhary in reply to a query in Parliament, totaling ₹1.12 lakh crore. The outcome of the pending petitions by online gaming companies challenging the showcause notices in the Supreme Court will be crucial to determining the survival of the sector.

Source: G2G 

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