The pre-show cause notifications were given following a rise in the GST rate for real money games to 28% on the total wager put at the entry level.
According to The Economic Times (ET), the Directorate General of GST Intelligence (DGGI) has issued pre-show cause letters to about 12 online real money gambling enterprises for tax dues of Rs 55,000 crore. Dream11, the gambling unicorn, is said to have gotten the biggest tax notice for Rs 25,000 crore in back taxes.
Notably, a pre-show cause notice is issued to corporations before the income tax authority issues a show-cause notice informing them of the amount of their dues. According to ET, other organizations that have gotten notifications include Head Digital Works and Play Games 24*7.
According to experts cited in the paper, the cumulative value of all notifications might exceed Rs 1 trillion. These warnings are being given following an increase in the GST rate for real money games to 28% on the total wager placed at the entry level. The new policy will take effect on October 1.
A Rs 21,000 crore tax notice was issued to Bengaluru-based online gaming business Gameskraft Technology in 2022. This was the largest such claim in indirect taxes history at the time.
The Karnataka High Court, however, annulled the notice, and the tax agency appealed the court’s judgment. The Supreme Court confirmed the High Court verdict earlier this month and opted to hear the case later this month or early next.
The Supreme Court’s ruling is anticipated to create a precedent for future investigations into internet gambling.
Aside from online platforms, the DGGI is purportedly clamping down on casino operators that fail to pay taxes.
Delta Corp received a tax notice for Rs 11,139 crore, plus interest and penalties, last week for allegedly failing to pay GST on the gross bet value. According to the corporation, it would exhaust all legal options to fight the action and processes.
The new law specifies that a tax would be levied on money spent by users to play online games, with no distinction made between skill and chance games. In most cases, this is a source of disagreement.
The new rule also includes a new definition of “online money gaming,” which includes both skill and chance games. Online gaming is described as “the provision of a game over the internet or an electronic network, including online gambling.”
Despite opposition from a few states, including Goa, Sikkim, and Delhi, the GST Council imposed the highest rate without a vote in July since majority states agreed.
Following that, the proposed modification to the Central GST Act was approved by Parliament.
