Recently, a government official stated that show-cause notices have been issued to online gaming platforms and casinos, requiring them to potentially repay more than ₹1 trillion in goods and services tax (GST). However, the actual recovery of this sum hinges on the outcome of the ongoing dispute in the Supreme Court.
Government official revealed that a Goods and Services Tax (GST) audit conducted on these companies for the fiscal year 2018, which marked the inaugural year of GST implementation, unveiled a significant shortfall in tax payments, amounting to approximately ₹1 trillion. As the deadline for issuing notices for the fiscal year 2018 was rapidly approaching in September, many of these notices were clustered together and sent out.
“In the case of online gaming, one case has been decided by the Karnataka high court. That matter is before the Supreme Court. They will be deciding on the core issue. The recovery (of the tax demand) will depend on the outcome of court cases," said the official.
The mention was regarding a legal dispute between GST authorities and Gameskraft Technologies Pvt. Ltd, which received a favorable ruling from the Karnataka High Court in May. The ruling pertained to the imposition of a 28% GST on online gaming.
The high court invalidated the notice of over ₹20,000 crore issued by the Directorate General of GST Intelligence (DGGI). Nevertheless, the Supreme Court, in response to a government appeal, put a stay on this order in September.
In light of this situation, tax authorities are unlikely to pursue an aggressive approach to recover these dues. They are waiting for the Supreme Court's final decision on whether a 28% GST is applicable to online gaming companies. This state of affairs brings a measure of relief to these online gaming platforms.
As of the time of publishing, no responses have been received from the spokespeople representing the finance ministry, Central Board of Excise and Customs, and Gameskraft, despite emails sent to them on Wednesday.
The show-cause notices totaling ₹1 trillion, as mentioned earlier, pertain exclusively to online gaming firms and casinos. However, the government official did not disclose the overall shortfall in GST payments for all businesses whose FY18 GST returns have undergone an audit.
Furthermore, notices have been issued to various sectors, including auto manufacturers and insurance companies, in relation to their outstanding tax payments, subsequent to the initial audit of their GST returns.
While the debate over the 28% GST levy on online gaming companies, casinos, and horse racing clubs persists for the period up to the end of September, the government has introduced amendments to tax laws. These amendments ensure that the highest GST slab is applicable to entities within these sectors with effect from October 1.
The GST Council intends to review the implementation of the revamped tax regime at the end of March 2024.
With tax notices going to companies for the first year of the indirect tax reform now, the GST Appellate Tribunal, which has also been created recently, is expected to get a flurry of cases.
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