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12 More Online Gaming Companies To Get Govt Notice For Tax Evasion

On September 8, the GST Intelligence issued a Rs 21,000-crore tax notice against Bengaluru-based Gameskraft Technology on charges of evasion

12 More Online Gaming Companies To Get Govt Notice For Tax Evasion
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The union government is set to further tighten its noose on online gaming platforms in the country and has identified about 12 companies on Goods and Services Tax (GST) evasion charges, a senior government official told Outlook Business.

“The process of finalizing the names is on. There are about 10-12 such gaming platforms that would be investigated on the grounds of generating false invoices to evade paying GST. Tax notices would be sent out once the process is completed. There are many such companies that have come to the notice of the department on the grounds of tax evasion,” the official said.  

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The government has already sent notices to seven online gaming companies and close to three dozen active, high-value players on these platforms. The official clarified that the new list includes names apart from the ones that have already been served notices.  

According to the official, the amount of evasion is in the range of Rs 75,000 – Rs 90,000 crore, or could even go up to Rs 1 lakh crore. With the final amount yet to be ascertained, the authorities are keeping a keen eye on how these online portals operate and is on the lookout for 'betting' activities.

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On September 8, the Directorate General of GST Intelligence had issued a Rs 21,000-crore tax notice against Bengaluru-based Gameskraft Technology on charges of evasion. According to the notice, 28 per cent GST would be imposed on the company's transactions. In its submission before the high court bench, the gaming company said its platform offers only games of skill and not games of chance.

Skill Versus Chance

Presently, the government is working on a definite way to tax online gaming portals. The GST law does not provide any clear-cut definition of online gaming and hence, deciding what constitutes ‘game of chance’ and ‘game of skill’ has been a challenge before the GST council. As per existing laws, games of chance attract 28 per cent GST, whereas online games of skill, like fantasy sports or rummy, attract an 18 per cent tax rate.  

The government is considering to define online gaming as betting, which would attract a 28 per cent tax on the gross gaming value. If implemented, it could ruffle the burgeoning industry’s feathers as it will significantly affect the net taxable amount.

To better evaluate the sector, the government formed a group of ministers’ (GoM) panel for levying GST. This GoM panel is headed by Meghalaya chief minister Conrad Sangma and the eight-member panel also 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. Their view on what constitutes 'chance' and what is to be deemed 'skill' in the gaming sector would decide the rate of GST these services would attract. So far, the panel has not been able to reach a consensus regarding this.

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