DGCI, the Directorate General of Goods and Services Tax Intelligence, has issued a pre-show cause notice to 12 online gaming platforms. More specifically, the notice has been sent to online real-money gaming platforms like Dream11, Play Games 24*7, and Head Digital Works. It amounts to a total of ₹55,000 crore.
Notably, Dream11 has received the biggest share of the notice, with an unpaid due of ₹25,000 crore. This is not just the current biggest undue notice, but it is the biggest in history with the previous one that was served to Gameskraft Technologies in 2022 worth ₹21,000 crore. The notice will soon be followed by a show cause notice via the Income Tax Department, depending on how satisfactorily the involved online gaming platforms respond to the DGCI.
The current quantum due worth ₹55,000 crore is only for 12 platforms. Experts have estimated that the tax dues could rise to ₹1 trillion as the DGCI continues to investigate more companies.
DGCI’s notice comes days before the revised tax rate of 28% is scheduled to go into effect on October 1, 2023. It has been opposed by a couple of states like Delhi, Sikkim, and Goa; however, the Directorate is determined to table and implement the increased tax rate. It has also been clarified in the Central GST Act.
There is no official distinction between games based on skill and chance. Thereby, it is mandatory for platforms to levy a tax on the total amount that users pay. Previously, platforms could contest how much tax was actually applicable to them. The updated definition of online money gaming now covers games offered over the internet, irrespective of whether they are based on skill or chance.
Simply put, the tax rate of 28% now applies to all the platforms that provide online money gaming, whether based on skill or chance.
DGCI is simultaneously going after casino operators. They have, too, been accused of having tax dues under their names. The first one to feel the blow is Delta Corp. The casino operator received a notice from the department last week, notifying them about their dues worth ₹11,139 crore. This includes interest and penalty for failing to clear their GST (Goods and Services Tax) dues.
Delta Corp. was last heard quoting that it would pursue all the possible legal remedies before actually surrendering to the notice.
According to the gaming news, Gameskraft Technologies has also taken the matter to court. It received a sign of relief when the Karnataka High Court quashed the notice. The revenue department has challenged this decision and gone to the Supreme Court, with a hearing scheduled by the end of next month.
A verdict in this case will be imperative, as it will form the backbone for all the cases that current gaming platforms plan to come up with.
