India is considering adopting a more lenient approach towards GST demands on online real money gaming companies, according to sources.
Online gaming companies might experience relief as the Union government is expected to ease its position on retro goods and services tax (GST) demand notices, sources informed CNBC-TV18 on February 7.
Insiders suggest that the government acknowledges the existential challenges confronting gaming companies if they are compelled to settle GST demands raised for the period from July 2017 to March 2023.
The government is now recognizing the validity of the argument that expecting companies to meet unrealistic tax demands is impractical. Sources indicate that the authorities are likely to have sought legal opinions to navigate through the standoff with online gaming firms.
In 2022-23 and the initial seven months of 2023-24, online gaming companies received 71 show-cause notices for alleged GST evasion amounting to ₹1.12 lakh crore, as per information provided in the Rajya Sabha last year.
“As these notices are still awaiting adjudication, the corresponding GST demand has not been conclusively determined under the provisions of the CGST Act, 2017,” stated Minister of State for Finance Pankaj Chaudhary in response to a written question in the Upper House of Parliament on December 5.
This development occurred in August 2023 when the government decided to levy a 28% tax on the total funds deposited for playing online games by companies. Consequently, some firms, such as Mobile Premier League, resorted to laying off employees.
Online gaming companies find themselves in a dispute regarding the payment of a 28% GST rate instead of 18% for the period until October 1, 2023. While the companies assert that the 28% tax is applicable only from October 1, 2023, the government contends that the October 1 revision merely clarified a law already in force. The government maintains that the demand for tax dues is not retrospective.
Simultaneously, the issue regarding GST demands on online companies is under consideration in the Supreme Court. Additionally, the government has contested a Karnataka High Court order that nullified a ₹21,000 crore GST demand on Gameskraft in the apex court.