Online gaming industry gets tax notices worth Rs 1 lakh crore: Heres why

India’s tax authority has served show-cause notices amounting to Rs 1 lakh crore to the online gaming industry in India. A government official said that the notice is related to taxes that they have allegedly evaded. This has come at a time when the industry has raised concerns about the applicable GST rates.  In August 2023, the GST council amended the law, making it explicit that all online games involving bets, regardless of skill or chance, would be subject to a 28 percent GST rate on the full value of the bets placed, effective from October 1.

Lok Sabha passed two amendments to Goods and Service Tax (GST) laws, paving the way for this taxation shift. The Central Board of Indirect Taxes and Customs (CBIC) Chairman, Sanjay Agarwal, said that India is prepared to implement this 28 percent GST rate on online gaming, following consensus among all Indian states. These amendments primarily aimed to introduce a 28 percent GST rate for online gaming, casinos, and horse racing.

These amendments also streamline the taxation of online gaming, casinos, and horse racing in line with the GST Council’s resolution from August 2. In addition to this, the GST Council recommended adding specific provisions to the Integrated Goods and Services Tax (IGST) Act, 2017 to ensure compliance.

The amendments aim to shift the liability to pay GST on the supply of online money gaming from foreign suppliers to Indian customers. It also has measures to address non-compliance.

When it comes to valuing online gaming and actionable claims in casinos, the amount paid or payable to the supplier will be considered for taxation purposes, excluding any previous winnings. This ensures a consistent and transparent approach to taxation. India’s efforts to tax online gaming are part of a larger initiative to bring various sectors under the GST framework. This move aims to streamline tax collections and establish clear tax rates for these growing industries.

Meanwhile, the Indian government decided to allow restriction-free imports of laptops and tablets and launched a new system of “authorisation” aimed at monitoring shipments of such hardware without hurting market supply.

The new “import management system” takes effect from November 1 and requires companies to register the quantity and value of imports, but the government will not reject any import requests and will use the data for monitoring, the officials said.