Online gaming companies are embroiled in a significant legal dispute with tax authorities over a Goods and Services Tax (GST) rate disagreement. This contentious issue has led to the issuance of a colossal show cause notice amounting to Rs 1 lakh crore.
The Crux of the Matter: The root of this dispute lies in the GST rate imposed on the services offered by online gaming companies. These companies argue that they should be subject to an 18 percent GST rate, rather than the current 28 percent. A protracted battle has unfolded between the tax authorities and the online gaming sector.
Law Amendment and GST Rate Ambiguity: The conundrum centers around a legislative change by the GST Council in August 2023. This modification stipulated that beginning from October 1, GST at a rate of 28 percent would be applicable to the full value of all bets placed on online games, whether involving skill or chance. This alteration has sparked a contentious legal dispute.
Interpretational Disagreement: Online gaming companies contend that the 28 percent GST provision is applicable exclusively from October 1 onwards. However, the government’s stance asserts that the amendment serves to clarify an existing rule that has always been in effect. Thus, it implies that the 28 percent rate applies not only to post-October 1 bets but retroactively to those placed before this date as well.