Online gaming companies in India asked to pay $12 billion for tax evasion: Report

Online gaming companies operating in India have been asked to pay around 1 trillion rupees ($12.03 billion) in taxes they have allegedly evaded, news agency PTI reported citing a senior tax official.

The government imposed 28 per cent GST on online gaming companies in August on the full value of bets placed on online gaming platforms.

These include foreign companies as well who have bases in India.The GST law was amended, making it mandatory for overseas online gaming companies to register in India from October 1.

However, the government official said that there is no data yet of foreign gaming companies registering in India since October 1.

“Online gaming companies served notices worth about Rs 1 trillion rupees by GST authorities so far,” the official told the news agency.

The move comes a month after several online gaming firms like Dream11, and casino operator, like Delta Corp, received show cause notices for alleged short payment of taxes.

Separately, a show cause notice was sent to GamesKraft in September last year for alleged GST evasion of 210 billion rupees ($2.5 billion).

Tussle between firms and government

The online gaming sector was considered the sunrise sector in India in the wake of the exponential growth recorded by the industry during the pandemic.

Earlier, the gaming firms used to 18 per cent tax on the platform fees because the law was ambiguous, while betting and gambling always fell under the 28 per cent slab.

But in August, the GST Council announced the decision to amend the indirect tax law to clarify that all online games involving wagers, irrespective of whether they are based on skill or chance, will attract a GST of 28 percent on the full value of the bets placed –not on the gross gaming revenue – from October 1.

The provision under the GST law on taxing betting and gambling was invoked because the governments, both the state and central, wanted to regulate online real money gaming.

The firms opposed the move because the government made the tax slab rate retrospectively, as a result of which the online gaming companies started receiving demand notices for the past period.

Later, the government clarified that the tax liability of 28 per cent is not retrospective but pre-existing.

Gaming companies, however, insist that the rate of 28 per cent is only applicable from October. 1.

(With inputs from agencies)