GST For Online Gaming Players Calculated On Actual Bets Placed: Report

The prospective method suggested by the GST Council in August, in opposite to DGGI calculation, would lead to a 400 per cent on year increase in tax liability

The Directorate General of GST Intelligence (DGGI) has calculated the dues for its show cause notices to real-money gaming platforms on the actual bets placed on portals since 2017.

"In the case of Dream11, bets worth Rs 1 lakh crore were placed and this has attracted a GST of Rs 28,000 crore-plus," an official in the know told ET. "Similarly, in the case of Games24x7 Pvt Ltd and affiliates, bets of over Rs 71,000 crore were placed, which has attracted a GST of Rs 20,000 crore-plus."

The person further explained that even if an individual places four bets amounting to Rs 100, GST of 28 per cent is applicable every time a bet is placed.

Real-money gaming industry players estimated that the calculation involves taxation of a deposit amount every time it is rotated through a game.

The prospective method suggested by the GST Council in August, on contrary would lead to a 400 per cent on year increase in tax liability, the industry officials added.

What will compound problems for the industry is that the adjudicating authority can impose an 18 per cent interest on the amount for every financial year and a penalty.

"After the issue of show cause notices, the firms have the option of appealing before the adjudicating authority (AA). The interest, however, kicks in from the date of issue of the notice. And if the AA rules in favour of the department, the interest will be applicable on the amount the AA orders and penalty, if he deems fit, which could range between 5 per cent and 20 per cent. While interest will be calculated on a yearly basis, penalty will be on the entire amount," added the official.

However, industry officials were not sure of appealing before the AA, as that would also require firms to pay 10 per cent of the claim amount up to a cap of Rs 100 crore.

"A Dream11 might be able to muster that kind of an amount somehow, but it is unlikely that a smaller firm will even have enough cash to pay 10 per cent of the claims made against them," an industry lawyer told ET.

The industry representatives were said to have appealed to the government against the GST demands following the issue of the pre-show cause.

"The industry has pleaded that the GST demand raised is 3-4 times their revenues and that they will have to shut shop. They have also said that these bets were placed as early as 2017 and there is no mechanism to trace the customer and ask him/her to foot the GST bill now. This means the dues will have to be paid by the companies themselves. While certain state governments are against 28 per cent levy on fantasy games, the Centre is of the view that this isn't an essential commodity and 28 per cent tax should be levied," another official said.

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