The rollout of the 28 per cent GST levy on the full face value of bets under online money gaming from October 1 coincides with a clash of contrasting perspectives, with the industry arguing it can only be applied prospectively and the government maintaining it is only a “clarificatory” law that has been applicable since 2017.
All eyes are on the Supreme Court when it hears the Center’s appeal against the Karnataka High Court judgement quashing GamesKraft’s ₹21,000 crore GST notice. Almost all players in the gaming industry have alleged receiving tax demand notices.
There are two contentious issues: the first is the applicability of the law to either prospective or retrospective effect, and the second is the tax calculation formula. In an interview with businessine after the July meeting of the GST Council, Revenue Secretary Sanjay Malhotra said: “As far as we are concerned, GST rates on online gaming, casinos, and horse racing were always 28 per cent... on the face value. So, the question of retrospective amendment does not arise because this is only in the nature of clarification.”
According to Sudipta Bhattacharjee, Partner at Khaitan & Co., while the amendments in the CGST Act and Rules have not specifically been made retrospectively applicable, the government has taken the position that they are “merely clarificatory”. This is to create the basis to argue that, while not formally retrospective, in effect, the new GST provisions were applicable from July 2017.
Tanushree Roy, Director-Indirect Tax with Nangia Andersen India, said: “The government’s claim that proposed amendments are only clarificatory in nature would be tested by the Supreme Court in the case of Gameskraft, and if the court rules that amendments are not clarificatory but substantive, then they would be prospectively applied,” she said.
Method of calculation
Tax officials clarified that GST is to be levied at 28 per cent on the full value of the bets placed in the case of online money gaming.The industry is currently charging GST on platform fees (i.e., gross gaming revenue) from gamers at 18 per cent. “Platform fees vary and generally range between 7 and 20 per cent of the face value of the entire amount contributed by gamers on such platforms,” Roy said.
As the Supreme Court has stayed the Karnataka High Court ruling, the Tax Department is issuing notices based on differences in calculating taxes.