Sports

GST agency to fight top online game companies


The online gaming sector in India faces a series of tax claims from the goods and services tax (GST) authorities, along the lines of an announcement made to unicorn startup Gameskraft Technology on weekend.

On September 25, the Director General of GST Intelligence (DGGI) issued an official notice asking Gameskraft to pay 21,000 crore after another announcement on September 8 when the company said taxes paid by the startup related to misclassification as a service rather than lawsuitable claims, are taxable at the rate of 21,000 crore. 28%.

According to a person familiar with the development, hundreds of other announcements are in the works and could soon be issued to online gaming companies, casinos and other companies classified as betting platforms by the suite. and gambling.

The person said DGGI has been working on these notifications for over a year now, and that the Gameskraft announcement was only the first to be sent.

Two lawyers for online gaming companies in India also said their clients had received “exploratory communications” from GST regulators. One of them said the client was able to successfully prove the job was not in error. A spokesman for the Treasury Department did not comment on the story.

“Rummy is claimed to be a game of skill like horse racing, bridge and fantasy games. So the announcement was a departure from the well-established law of the land. As a responsible startup with a unicorn status in the online game of skill, we have eliminated GST and income tax obligations following industry standard practice, now over a decade old “, a spokesperson for Gameskraft said in a statement on Sunday.

“We are confident that we will be able to respond to this announcement to the full satisfaction of the authorities as they have sought to impose a 28% tax rate applicable to games of chance and lotteries. , rather than 18% applied to online platforms of the game of skill,” added the spokesperson. The company on Monday also filed an application in the Karnataka high court to oppose the announcement, which will be heard on September 27.

The announcement comes amid an ongoing controversy over the composition to which GST can be imposed between online gaming companies and the GST regulator. Rule 31(A) of the CGST Act, which applies to betting, horse racing, etc., allows GST to be collected on gross game value (GGV) rather than gross game revenue (GGR).

In the online gaming industry, players combine their money to create a pool of prizes, which are then used to pay out winnings. The difference between these combined deposits and winnings makes up the GGR. GGV, on the other hand, is a combined prize pool.

While the sector currently pays 18% in tax to GGR, industry stakeholders say they have accepted that the tax will be charged at 28%, in line with those levied on non-essential services. other. However, they are concerned that imposing a 28% GST on GGV will double the tax rate for the industry and force some companies to close. “The question of classifying the nature of games as “games of skill” and “games of chance” needs to be determined based on principles and tests set forth by the higher court,” Asish Philip, partner at law firm Lakshmikumaran and Sridharan, said.

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