The Union government is reportedly considering easing its stance on the retro goods and services tax (GST) demand notices issued to online gaming companies, several sources revealed on February 7. This development comes amidst growing recognition within the government of the challenges gaming companies face in meeting unrealistic tax demands raised between July 2017 and March 2023.
During a recent conclave in Mumbai organized by the Interactive Forum on Indian Economy (IFIE) on January 30, 2024, members concerned with the Online Skill Gaming industry shed light on measures to support the sunrise industry. Among several measures, conducive GST rates and self-regulation standards were discussed and were of primary focus. The industry would welcome the accommodating stance that the Government of India is showing.
”50-Billion Dollar Online Gaming Industry Can Be Unleashed” – Shankar Aggarwal, Fromer Secretary, Govt. of India, bats for Online Gaming Industry Regulation #ShankarAggarwal #GamingIndustry #EconomicalGrowth #OnlineSkillGaming #SOGFederation https://t.co/z4ppwwmldj
— POWER CORRIDORS (@power_corridors) February 6, 2024
Government Reassessment of GST Demands
The government’s reassessment of GST demands for online gaming companies follows a realization of these firms’ existential issues. Sources suggest that the government acknowledges the merit in the argument that expecting companies to pay unrealistic tax demands is impractical. Legal opinions are being sought to navigate the ongoing tussle with online gaming firms.
Show-Cause Notices and Pending Adjudication
Online gaming companies have received 71 show-cause notices for alleged GST evasion amounting to ₹1.12 lakh crore in 2022-23 and the first seven months of 2023-24. However, as these notices are pending adjudication, the respective GST demands remain undetermined under the CGST Act, 2017 provisions, as confirmed by Minister of State for Finance Pankaj Chaudhary.
Considerations Amidst Legal Proceedings
The government’s stance on GST demands for online gaming companies is also being examined in the Supreme Court, while a separate challenge to quash ₹21,000 crore GST demand on Gameskraft is underway. Additionally, just days after the Mumbai conclave organized by the Interactive Forum on Indian Economy (IFIE) on January 30, 2024, the Government of India has indicated a potential softening of its stance on GST rates for online real money gaming companies.
Insights from the Mumbai Conclave
At the Mumbai conclave organized by IFIE, legal and industry experts emphasized the need for the government to consider the industry’s demands and embrace self-regulation to unlock the potential of India’s multi-billion-dollar online gaming industry.
Former Chief Justice of India K.G. Balakrishnan emphasized the significance of regulating the online gaming industry, stressing the importance of skill-based gaming over chance-based games.
Former Secretary of the Government of India, Shankar Aggarwal, highlighted the country’s underutilization in the global online gaming market and proposed measures to unleash India’s share of this lucrative industry.
Dr. Debi Prasad Dash, Former Principal DG, DRI & DG GST Intelligence, Govt of India, underscored the necessity of a uniform federal-level regulation to propel the gaming industry’s development phase, capitalizing on various growth drivers.
Former Supreme Court Judge Justice Gyan Sudha Misra suggested placing conditions in the Ethical Committee to ensure the focus remains on skill-based gaming. She also emphasized self-regulation of the industry.
As discussions continue, the potential softening of the Union government’s stance on GST demands for online gaming companies offers hope for the industry’s stakeholders, highlighting the ongoing efforts to address regulatory challenges and foster growth.