After Gameskraft, the largest player in the online gaming industry Dream Sports has reportedly received a show cause notice for alleged GST evasion. As 40 more firms are being investigated, more notices are expected in the coming months
There are more than 40 skill-gaming firms that are being investigated with regard to GST evasion, as per news reports. Earlier on Tuesday, Dream Sports (Dream11's parent company) filed a writ petition in the Bombay High Court challenging the show cause notice issued by authorities for alleged GST evasion, by not paying 28 percent on the face value of bets, according to Moneycontrol. The amount of tax claim in the show cause notice is unclear, reports suggest it is much higher than Gameskraft's Rs21,000 crore.
This comes weeks after Finance Minister Nirmala Sitharaman announced that online gaming, casinos and horse racing will be taxed at a uniform rate of 28 percent. She stated that the tax will be applicable on the face value of bets placed (in case of online gaming and horse racing) and chips purchased (for casinos), with no distinction between games of skill and chance. Later it was clarified that this 28 percent was to be charged on the initial deposit, and not on the Contest Entry Amount (CEA) or every bet.
Also read: 28 percent GST on online gaming: Industry cites ambiguities even as clarity emerges
The industry which has already been struggling to cope with the soon-to-be implemented amendment is all set to receive many more notices around GST evasion.
Earlier, the view taken by the authorities was that games of skill and games of chance (betting and gambling companies) were not taxed at the same rate. Which means, betting and gambling companies were charged a 28 percent GST on the gross gaming revenue. “On the other hand,†explains Abhishek Malhotra, managing partner, TMT Law Practice, “the companies that were offering games of skill were exempted from this particular heading, known as 'actionable claim'. So they were being treated as services and charged an 18 percent GST on the commission they earn.â€