Delhi Finance Minister Atishi expressed deep concern over the issuance of tax evasion notices totaling ₹1.5 lakh crore to online gaming companies, warning that these actions could potentially cripple the industry. She has announced her intention to appeal for the withdrawal of these notices during the 52nd meeting of the Goods and Services Tax (GST) Council.
Industry’s Valuation vs. Tax Notices
Atishi highlighted a stark contrast between the valuation of online gaming companies at ₹23,000 crore and the staggering ₹1.5 lakh crore in tax evasion notices issued to companies within the online gaming sector. She emphasized the urgent need to seek the withdrawal of these notices to protect an industry that is already grappling with the adverse effects of a 28 percent tax rate.
Impact on Investor Confidence
The Delhi Finance Minister pointed out that an “unstable and erratic tax environment” could deter foreign investors from entering the online gaming industry. This, in turn, could have a detrimental impact on the broader startup ecosystem in the country.
Background on GST Amendments
During its 51st meeting held on August 2, the GST Council introduced amendments to the GST laws. These changes clarified that the 28 percent tax rate applies to casinos, horse racing, and online gaming, with taxation being based on the full value of bets placed rather than the gross gaming revenue. These amendments became operational on October 1 following approval by Parliament during the monsoon session.
Show-Cause Notices and Tax Demands
Despite the recent implementation of these amendments, numerous online real-money gaming companies have received show-cause notices for alleged tax evasion. For instance, Play Games 24X7, the operator of RummyCircle and My11Circle, reportedly received notices for ₹21,000 crore, while fantasy e-sports firm Dream11 was served with a notice for ₹28,000 crore.
Cumulative Tax Demands
Authorities are said to be preparing to issue tax demands totaling as much as ₹1.5 trillion from online gaming companies for alleged underpayments spanning several years. It is worth noting that these notices appear to pertain to the period preceding the recent GST law amendments, with tax officials applying a 28 percent tax to the full value of bets placed during that time.
