The government of India has issued tax notices to several online gaming companies, demanding around Rs 1 lakh crore for alleged tax evasion. The notices are based on the government’s decision to impose 28 per cent GST on the turnover of online gaming companies, horse racing and casinos.
The tax authorities have claimed that the online gaming companies have not paid the GST on the total funds deposited by the players to play online games. The gaming companies have argued that they only charge a platform fee or commission from the players, and the rest of the funds are used for prize money or payouts.
Gaming companies challenge the tax notices in court
Some of the online gaming companies that have received the tax notices include Dream11, Gameskraft and Delta Corp. All these firms have challenged the tax notices in court, calling them unreasonable and arbitrary.
The Bombay High Court in Goa has issued an interim order, prohibiting the tax authorities from making any definitive decisions on the tax notices without prior court approval. The court has also fixed dates for completion of pleadings and hearing and final disposal of the writ petitions filed by the gaming companies.
Impact of higher taxation on online gaming industry
The online gaming industry in India has been going through a turbulent period after the government decided to impose a higher taxation regime on it. The industry has claimed that the 28 per cent GST rate is unfair and will hamper the growth and innovation of the sector.
Some of the online gaming companies have also faced layoffs and losses due to the higher taxation. For instance, Mobile Premier League, a popular online gaming platform, had to let go of some of its employees due to financial stress.
The online gaming industry has also appealed to the government to reconsider its decision and refrain from imposing 28 per cent GST on it. The industry has said that such a move will erode the confidence of foreign investors and entrepreneurs who are interested in investing in this sector.