Show cause notices to e-gaming cos as per legal provisions, GST demand based on data analysis: CBIC chief

Central Board of Indirect Taxes and Customs (CBIC) Chairman Sanjay Kumar Agarwal addresses conference in New Delhi on September 28, 2023.
| Photo Credit: ANI

E-gaming companies have been issued show cause notices for alleged GST evasion as per legal provisions, the head of Central Board of Indirect Taxes and Customs (CBIC) Sanjay Kumar Agarwal said on September 28, adding that the tax demanded is based on analysis of data.

He also said that the government is fully prepared to implement from October 1 the amended provisions for levying a 28 per cent tax on online gaming, casinos and horse racing along with mandatory registration of offshore online gaming platforms.

In its meetings in July and August, the GST Council had approved amendments in law to include online gaming, casinos and horse racing as taxable actionable claims, and clarified that such supplies would attract 28% Goods and Services Tax (GST) on full bet value.

Parliament last month passed amendments to the Central GST and Integrated GST laws to give effect to the Council’s decision.

Since then, online gaming companies like Dream11 and casino operator Delta Corp have received show cause notices from taxmen for non-payment of GST at 28% on the full face value of bets placed on their platform.

“The show cause notice which is going is as per legal provision… The department is taking a uniform stand in the interpretation of the law and accordingly show cause notices are being issued,” Mr. Agarwal told reporters.

Asked about the quantum of taxes that are due from these e-gaming companies, Agarwal said, “It is very difficult for me to say there are many companies. Data is being collected and wherever the data is received, the department has issued show cause notice”.

While maintaining that online gaming, casinos and horse racing was subject to 28 per cent tax since the inception of GST, the GST Council had decided that the amended provision to classify these supplies as actionable claims and clarifying the taxation provisions would come into effect from October 1.

A review of the implementation was proposed to be carried out after six months, which is April 2024.

Even though the amendments in CGST and IGST laws have been passed by Parliament, the finance ministry is yet to notify the appointed date for implementation of these clarificatory amendments.

Also, some states are yet to pass amendments in their state GST laws.

About a dozen states have passed the amendments in their assemblies, while a similar number of states are understood to have brought in an ordinance to pave the way for implementation of the changes from October 1.

“We are fully prepared to bring it (amended provision of online gaming) into effect from October 1. As per the decision taken in the last meeting of the GST council, the related notifications are under process. It is necessary for all states to pass the law or come out with an ordinance… by September 30,” the CBIC chief said.

Further, Agarwal said that the GST Council in its last meeting had decided that the clarificatory amendments in GST laws with regard to online gaming would be implemented from October 1.

“If there is a requirement (for notification), it will be fulfilled,” Mr. Agarwal added.

The show cause notice slapped on Delta Corp last week was for alleged short payment of taxes worth Rs 16,800 crore.

In September last year, a similar show cause notice was served to online gaming company Gameskraft for recovery of Rs 21,000 crore GST. The company had approached the Karnataka High Court which had quashed the show cause notice.

Following this, the revenue department in July filed a Special Leave Petition in the Supreme Court on the Karnataka High Court ruling in the Gameskraft case. The next date of hearing is listed for October 10.