After the imposition of 28% GST, online money gaming companies face substantial tax demand of Rs 45,000 crore

Online money gaming companies, which previously claimed their games were skill-based, may now owe an additional tax of about Rs 45,000 crore, as reported by ET. The Central Board of Indirect Taxes and Customs (CBIC) has reviewed their GST liabilities since 2017.

These companies were taxed at 18% on their gross gaming revenue due to the belief that their games were skill-based, instead of the correct 28%, leading to a tax shortfall of Rs 45,000 crore. The difference in tax treatment for skill and chance-based games is no longer applicable.

The debate over whether online gaming is skill-based or chance-based has sparked discussions. Some companies argued for the lower 18% tax rate by categorizing their activities as skill-based. 

However, the GST Council changed the rules on July 11, requiring a uniform 28% tax on the total bet value, regardless of skill or chance.

A senior CBIC official revealed that the gaming industry has underpaid about Rs. 45,000 crore in taxes since GST implementation. The Directorate General of GST Intelligence is furnishing notices to these companies. Real money gaming firms, holding a 77% share in online gaming, have paid less than Ôé╣5,000 crore in GST since 2017.

However, the actual tax owed is over Rs. 50,000 crore. This encompasses offshore gaming entities evading over Rs. 12,000 crore and a Rs. 21,000 crore levy on Gameskraft. 

The Centre has contested the Karnataka High Court's ruling against DGGI's tax demand notice on Gameskraft by filing a special leave petition in the Supreme Court.

The recent CGST amendment has clarified that all online money gaming companies are subject to 28% GST and must cover the remaining tax. 

The Parliament approved these changes, reflecting the council's adjustments. The industry seeks these amendments to be applied without retrospective effect.

Also Read: How to Pay The Late Filing Penalty While Filing Belated Income Tax Returns