GST Council Likely To Quash Retrospective Tax Demands On Indian Online Gaming

The Goods and Services Tax (GST) Council, at its meeting on Saturday, is expected to take up a key amendment that has the potential to resolve the vexatious issue of retrospective taxation for online gaming companies.

This proposal, suggested by the law committee, aims to address tax notices issued where lower taxes were paid due to interpretation issues or lack of clarity in the law.

“The Law Committee recommended that a provision may be incorporated in GST laws empowering the central and state governments to regularize, based on the recommendations of the GST Council, non–levy or short levy of GST or Compensation Cess where it is found that such non-levy or short levy was a result of general practice in the trade or a section of trade. Law Committee also recommended that no refund of GST or Compensation Cess may be allowed on account of any notification issued in this regard”, the proposal states.

According to an Economic Times report, the law committee has recommended the introduction of a new Section 11A to the CGST Act. This section would empower the government to refrain from recovering GST that was not levied or was under-levied due to prevalent general practices.

The GST Council is set to deliberate on this recommendation at its upcoming meeting on June 22. If approved, this amendment would enable authorities to quash tax demands raised retrospectively, offering significant relief to the online gaming industry.

However, the amendment does not address the issue of overpaid taxes. Companies that have paid excess GST due to these practices will not be eligible for refunds.

The council will decide on this recommendation from the Law Committee at the forthcoming meeting and may also decide how to treat the demand notices sent of around Rs. 1.5 lakh crore to 80 online gaming companies in India.

The 52nd GST Council, at its October 2023 meeting, had decided to impose a 28 per cent GST on the initial bet amount, with a pending six-month review to be revisited in the upcoming meeting. However, sources indicate that the government remains firm on the current taxation approach on online gaming, citing regulatory benefits and a significant increase in tax revenue since the GST’s introduction.

Goods and services tax collections from online gaming have risen by as much as 400 per cent, to an average of Rs 1,200 crore a month, since the new regime took effect on October 1, 2023.

Gaming Stocks Trade Higher

Shares of online gaming players Delta Corp and Nazara Tech are trading higher after a news report suggested the GST Council could consider amendment to the CGST Act to quash retrospective tax demands. The gaming industry has been seeking a more favourable taxation regime from the government.

At 11am, shares of Delta Corp were up over 12 per cent while Nazara Tech too seen a spike in share price early in trade. In the past one month, the share prices of Delta Corp are higher by 23 per cent and that of Nazara is up by 40 per cent.