The GST Act will now have provisions to recognise general practice in trade to consider cases of non-levy or short-levy. However, contrary to speculation, this will not provide any relief to online gaming companies, though some experts feel the proposed section has the potential to do so.

The GST Council has recommended inserting a new Section 11A in the CGST Act to give powers to the government, on the recommendations of the Council, to allow regularisation of non-levy or short levy of GST where tax was being short paid or not paid due to common trade practices. A senior tax official clarified that this is an enabling power and not meant to waive a short levy by online gaming companies.

“This is only for those cases where there is a decision to waive tax on an as-is, where-is basis,” he told businessline. Further, he said that there will be a notification issued to this effect under the new Section 11A. The new section is akin to Section 11C of the Central Excise Duty and Section 28A of the Customs Act, which empowers the government to waive a short levy on account of business practice. Post-introduction of GST, the GST Council did recommend regularisation of certain assessments on ‘as is basis.’ Another official explained that though the Council recommended regularisation through new provision with a rider that no refund will be allowed on account of any notification.

According to MS Mani, Partner with Deloitte, since GST is a transaction-based business tax applicable to all businesses, the specific business practices of a particular business may not be aligned with the GST requirements. The proposed amendment will, in such cases, provide a method to recognise such business practices followed by the trade at large in that industry and reduce litigation. “A legal provision to recognise trade practices would also improve the ease of doing business,” he said.

Harsh Shah, Partner with Economic Laws Practice, said that while the section, when introduced, would apply to any sector, one of the wide anticipations is that it might be used to provide relief to huge demand notices received by online money gaming companies. Interestingly, “the power under erstwhile regime extended to refund eligibility of tax paid in such cases and thus, it importantly remains to be seen if the proposed amendment will also provide for eligibility of refunds within specified timelines if tax has already been paid by a taxpayer,” he said

According to Shashi Mathews, Partner with INDUSLAW, as it appears, relief to the online gaming sector is not in the offing, and all eyes will now be on the Supreme Court hearing disputes on demands for the period up to September 2023. However, “online gaming operators have a good case to represent before the government or the council to consider past practices adopted by the industry,” he said.

Earlier, online gaming companies supplying actionable claims were levying GST at the rate of 18 per cent on platform fees ranging from 5 to 20 per cent of the full-face value, disputing the 28 per cent levy on actionable claims in the form of betting and gambling supplied in online gaming before various legal fora. However, the GST Council, in its meeting dated July 11 last year, recommended that actionable claims supplied in casino, horse racing, and online gaming are leviable to a GST rate of 28 per cent and recommended carrying out amendments in the law to remove any ambiguity.