FM: Entry-Level Rule Won’t Relieve ₹1.12 Cr GST Demands

21 Dec 2023

The Rajya Sabha Shows Keen Interest in Gaming Business Troubles

Over its ongoing Winter Session, the Indian Parliament has been showing continuous interest on the subject of enormous GST Enforcement notices against online gaming and casino operators, including Dream11, Games24x7, Delta Corp, and others.

After MoS for Finance Pankaj Chaudhary informed the Members of the Rajya Sabha at the beginning of December that a total of 71 show cause notices had been issued by departments of the DGGI (Directorate General of GST Intelligence), collectively demanding ₹1,12,332 crore from the business, Union Finance Minister Nirmala Sitharaman herself had to present further clarifications to the MPs this week.

“The clarification on that (online gaming) was issued. 28 per cent is the tax and as to who it will apply to and on whom the incidence will fall is clearly explained… The valuation rules to exclude winnings is prospective. So, I hope there is not confusion on that,” FM Sitharaman told the Lok Sabha on Tuesday, the 19th of December.

GST Enforcement Demands Based on “Very High” Calculations

Clarifying what had already been written in law during Parliament’s Monsoon Session 2023, the Minister of Finance indirectly admitted that the current hot potato – the ₹1.12 crore GST Enforcement demands, had been based on calculations defined as “very high” by her own Ministry.

“There are pros and cons both ways as to whether we tax it at the entry level itself or we tax each and every bet, the taxation, as has been claimed by the gaming industry, becomes very high in case it is taxed at each and every bet. That’s true. It’s a fact, it’s true,” Revenue Secretary Sanjay Malhotra said to reporters between the 50th and the 51st GST Council Meetings.

The 51st Meeting was, in practice, an emergency session of the GST Council, urgently convened online on the 2nd of August to deal specifically with this issue and adopt the entry-level rule, which was raised after the previous Meeting, held just three weeks earlier on the 11th of July.

Thus, the freshly adopted amendments to central GST laws came into effect on the 1st of October with a last-minute notification by the Finance Ministry, including the provision that GST is to be levied only on entry deposits and not when wagering subsequent winnings.

The Battle in the Supreme Court will Resume on the 8th of January

The fate of the GST demands and the homegrown industry will be decided at the arena of the Supreme Court, with the next hearing on the mega case that has batched together all pending similar GST treatment cases scheduled for Monday, the 8th of January next year.

According to the stance of GST Enforcement authorities, the owed GST on online gaming and casino activities before the 1st of October, 2023, is 28% over the full value of “each and every bet.”

The online skill gaming industry has been paying only 18% of its Gross Gaming Revenue or trade margin and is now defending itself in court against the tax demands.