A host of online gaming, like Dream11, and casino operator, like Delta Corp, have received GST show cause notices last month for alleged short payment of taxes. File.
| Photo Credit: Reuters

GST authorities have issued show cause notices worth ₹1 lakh crore to online gaming companies for tax evasion so far, a senior official said on October 25.

The official, however, said that there is no data yet of foreign gaming companies registering in India since October 1.

The government has amended the GST law, making it mandatory for overseas online gaming companies to register in India from October 1.

The GST Council had in August clarified that 28% Goods and Services Tax (GST) would be levied on full value of bets placed on online gaming platforms.

“Online gaming companies served notices worth about ₹1 lakh crore by GST authorities so far,” the official said.

A host of online gaming, like Dream11, and casino operator, like Delta Corp, have received GST show cause notices last month for alleged short payment of taxes.

Separately, a show cause notice was sent to GamesKraft in September last year for alleged GST evasion of ₹21,000 crore.

While the Karnataka High Court has ruled in favour of the company, the central government in July filed a Special Leave Petition (SLP) in the Supreme Court.

New Delhi:

As states like Delhi and Goa raised the issue of tax demand on online gaming companies and casinos retrospectively, Revenue Secretary Sanjay Malhotra on Saturday reiterated that 28 per cent GST was levied on online gaming and casinos even before.

“Certain members had raised the issue of retrospective taxation. It was informed to them that this is not retrospective, and this was the law earlier. These liabilities already existed because money online games played with bets…They were already attracting (28 per cent GST) by way of betting or gambling,” Malhotra told reporters.

In the 52nd GST council meeting, Delhi and Goa raised the issue of tax demands on e-gaming companies and casinos.

Delhi Finance Minister Atishi said tax notices for the past 6 years calculated at a much higher rate of 28 per cent are being sent to online gaming cos, even though on October 1, this 28 per cent GST was to be implemented.

“An industry whose revenue is Rs 23,000 crore, you are slapping a tax notice of Rs 1.5 lakh crore…this is to kill the industry. This shows an unsafe erratic investment environment in Indian startups,” Atishi said.

Malhotra further said that some states like Delhi and Goa raised the issue of online gaming companies facing GST demand notices for alleged evasion.

“There were discussions on charges (tax demand notice) on these companies, retrospectively. Because DGGI is an independent body, there cannot be any interference. The (GST Council) chairperson said she would make clarifications available to DGGI if required,” Chhattisgarh Deputy Chief Minister TS Singh Deo, also a member of the GST Council, said.

The GST Council in its meetings in July and August had decided to clarify the levy of 28 per cent GST on full face value of bets placed on online gaming platforms and horse racing and casinos.

Online gaming, casinos and horse racing were classified as actionable claims, like lottery, betting and gambling, under GST with 28 per cent tax. The amendments to Central GST and Integrated GST were approved by Parliament and were notified by the central government effective October 1.

States were also required to pass amendments to state GST (SGST) laws. So far, 18 states have passed the amendments either in their assembles or through ordinance.

The remaining 13 states would also be passing the amendments, with effect from October 1 in due course.

New Delhi:

The Federation of Indian Fantasy Sports (FIFS) on Wednesday urged the government not to impose a 28% GST on online gaming with retrospective effect, as it is discouraging investors from putting their money into this booming industry.

The GST Council in its meeting in August held that online gaming would attract 28% GST on the face value of bets at entry level. Pursuant to the decision, the GST authorities have sent notices to several online gaming companies for recovery of taxes.

Speaking at the ‘TIOL Tax Congresss 2023’, Federation of Indian Fantasy Sports (FIFS) Director General Joy Bhattarcharjee said the issue of GST rate is more or less settled and the only issue that the industry have is retrospective provision of the law because it is discouraging investors to put in their money into this booming industry,” he said.

“However, retrospectivity of GST provisions is a very difficult blow for us. Having ‘contingent liability’ will spook away the investors whom we need during this growth phase,” he said.

Also, speaking at the occasion, Directorate General of GST Intelligence (DGGI) Principal DG Anil Kumar Gupta said that the government’s intention is not to discourage a rising industry, but to settle an issue lingering for a long time and the government is quite open to looking into the progress after some time. 

“It was not an easy decision… moreover, it will be up for review after six months, wherein depending on the scenario, the government will take a call,” Mr Gupta said.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Actor Ranbir Kapoor has been summoned by the Enforcement Directorate (ED) in connection with a case involving the Mahadev Gaming App. The agency is investigating alleged money laundering in the online betting app, which is illegal in India, that is being run by two UAE-based kingpins. Mr Kapoor appeared in a few advertisements promoting the platform. The ED has conducted multiple raids across many cities to probe the flow of money through the Mahadev Gaming app. ED has said that it is an umbrella syndicate that promotes betting.

What is the Mahadev Gaming app?

It provides platforms for illegal betting in different live games like Poker, card games, chance games, badminton, tennis, football as well as betting on cricket, along with the provision for playing a number of card games like Teen Patti (a card game), Poker, Dragon Tiger, and virtual cricket games.

The people who maintain Mahadev app operate a number of closed groups on various instant messaging platforms. They also run 4-5 similar platforms and reportedly make a profit of Rs 200 crore every day.

The modus operandi

They advertise contact number over websites and lure people to play to earn profits. Such numbers can only be contacted on platforms like WhatsApp.

Once a user contacts the given number, he/she will be provided two separate contact numbers. One of them is for depositing money and collecting points in user IDs used to make bets, while the second number is for contacting the website to encash the accumulated points in the designated IDs.

The IDs are generally created on multiple website.

All the games are rigged in a manner that overall the panel owners will not lose money and despite initial profits to the user, ultimately, they are likely to lose huge sums.

Who are the promoters of the Mahadev App?

Sourabh Chandrakar and Ravi Uppal from Chhattisgarh’s Bhilai are the main promoters of Mahadev app and are running their operations from Dubai.

The app is operated by several “panel/branches that are sold by Chandrakar and Uppal like a small franchise.

Payments are done by bank accounts that are either opened fraudulently or are loaned for commission.

There was report a few weeks ago that Chandrakar spent Rs 200 crore on his wedding in Dubai. He reportedly leased a private aircraft to fly his family and friends from Nagpur to Dubai for the wedding.

ED raids against Mahadev App

The agency raided the founders of the Mahadev Gambling App’s offices in many cities, including Kolkata, Bhopal, and Mumbai, and seized assets worth crores.

It also searched the premises of Chief Minister Bhupesh Baghel’s political adviser and two Officers on Special Duty (OSDs) alleging that “high ranking officials connected with the Chief Minister’s Office” in Chhattisgarh received kickbacks to allow an illegal gaming app to run its operations in the state.

Starting October 1, several new rules will come into effect. These rules, which will affect the daily lives of people, range from changes to the use of birth certificates to the implementation of the new TCS (tax collected at source) rule. Therefore, it is important to be aware of these fresh guidelines.

Here are 5 new rules that will come into effect from October 1: 

The Registration of Births and Deaths (Amendment) Act 

This law will come into force across the country from October 1. It will allow the use of a birth certificate as a single document for numerous purposes such as admission to an education institute, issuance of a driving licence, preparation of a voter list, Aadhaar number, registration of marriage or appointment to a government job. It will help create a national and state-level record of registered births and deaths, which will eventually ensure efficient and transparent public services and social benefits through digital registration.

Additionally, the act will also help avoid multiple documents to prove the date and place of birth, according to the government. It will even facilitate the registration process of adopted, orphan, abandoned, surrendered, surrogate child, and child to a single parent or unwed mother. 

New 20% TCS rule

The new rates of tax collection at source (TCS) will come into effect from October 1. These changes are important for anyone planning international travel, investing in foreign stocks, mutual funds, cryptocurrencies abroad, or pursuing higher education overseas. If someone spends above a certain amount in a financial year, TCS will apply. However, travellers using international credit cards during overseas visits will not attract TCS, as per the Finance Ministry. 

Under the Liberalised Remittance Scheme (LRS) by the Reserve Bank of India (RBI), one can send money abroad up to $250,000 per annum. But starting October 1, any remittance exceeding Rs 7 lakh for purposes other than medical and education will have a TCS of 20%. 

28% tax on online gaming 

Twenty eight per cent tax on online gaming will be effective from October 1, Finance Minister Nirmala Sitharaman announced in August. For the purpose of GST levy, the valuation of supply of online gaming and casinos will be done based on the amount paid or deposited with the supplier, excluding the winning amount in the bet.

Explaining the tax, the finance minister said that suppose a bet is placed for Rs 1,000, and the player wins Rs 300. Then if the player again places a bet of Rs 1,300, then GST will not be levied on the winning amount.

No automated IGST refunds on pan masala, tobacco from October 1

In a bid to curb tax frauds, automated refund of Integrated GST (IGST) on the export of pan masala, tobacco and similar other items will be restricted from October 1, as per the Finance Ministry. Exporters of such items will have to approach jurisdictional tax officers with their refund claims for approval.

The items on which automated IGST refund restriction has been imposed include pan masala, unmanufactured tobacco, hookah, gutkha, smoking mixtures for pipes and cigarettes and other items, including mentha oil. Such items attract 28% IGST, plus a cess.

Bharat NCAP norms to roll out next month

India’s first car crash testing programme Bharat New Car Assessment Programme (BNCAP) will be implemented from October 1, 2023. Under this programme, car manufacturers can voluntarily get vehicles tested as per the Automotive Industry Standard (AIS) 197, the government has said.

Vehicles will get star ratings for Adult Occupants (AOP) and Child Occupant (COP) based on their performance in the tests. This will help assess to what extent a car may suffer damage in the event of an accident. Customers can refer to these star ratings to decide which car to buy.

Image for representation purpose only.
| Photo Credit: Reuters

The government on September 6 notified amendments to GST law in relation to the valuation methodology to be adopted by online gaming companies and casinos for calculating tax.

The Ministry of Finance notified amendments to Central GST law for calculating value of supply in case of online gaming and casinos as per the decision of the GST Council last month.

Also read: ‘Government intervention will give regulation of online gaming a lot more teeth’

EY Tax Partner Saurabh Agarwal said this shall effectively settle the ambiguity and uncertainty around this issue. “However, the aspect of whether mere deposit of money in a wallet qualifies as a supply is unclear, and may possibly be challenged by industry,” Mr. Agarwal added.

AMRG & Associates Senior Partner Rajat Mohan said under the valuation rules, the full tax rate would be applicable on the total amount paid to online gaming company/casinos, without any relief to the taxpayer in case of refund/return of money.

Notification clarified that winnings by any player would remain tax-neutral, as the entire tax is collected at first stage only.

“Until now, the government has not indicated any transitional provisions for the current cash buy-ins in the player pools. We can expect the government to clarify this position through a circular in the coming few months,” Mr. Mohan added.

Union Finance Minister Nirmala Sitharaman with Revenue Secretary Sanjay Malhotra during the 50th Goods and Services Tax (GST) Council Meeting at Vigyan Bhawan, in New Delhi, on July 11, 2023.
| Photo Credit: PTI

The Goods and Services Tax (GST) Council, at its 50th meeting on July 11, reduced or clarified the tax rate on some items ranging from uncooked or unfried snack pellets to special utility vehicles (SUVs), exempted imported drugs to treat cancer and rare diseases, and brought an end to a years-long debate on tax treatment of online gaming, casinos and horse racing.

Whether they involve skill or chance, or both or neither, bets and wagers made on all three activities, will attract a 28% levy and the GST laws will be amended to include online gaming, Finance Minister Nirmala Sitharaman said.

The Council also examined States’ proposals to set up 50 Benches of the much-awaited GST Appellate Tribunals in the country. The government has said that the statutory bodies to resolve mounting GST disputes shall become operational within four to six months, with Benches coming up in State capitals as well as places where High Courts have Benches, to begin with. The Council cleared the appointment and service conditions for tribunal members and the president, which will kick in from August 1.

The first meeting of the Council since February got off to a stormy start. Representatives of States not ruled by the BJP criticised the Union government’s recent decision to bring the GST Network under the purview of the Prevention of Money Laundering Act (PMLA), administered by the Enforcement Directorate (ED). The arguments were led by the Finance Ministers of Delhi and Punjab.

Ms. Sitharaman, who chaired the meeting, said many States had raised concerns about the issue and it was discussed after the listed agenda was concluded. Tamil Nadu, for instance, said that the inclusion of GSTN under the PMLA provisions is against the interests of taxpayers and against the basic objective of decriminalising the offences under the GST law.

Also read | Real money gaming industry reacts with shock to GST on deposits

“As this would affect the dealers across the country, especially small dealers, Tamil Nadu opposes the move,” a press statement from the State government said.

Revenue Secretary Sanjay Malhotra presented an explanation of the new provision to the Council, which he said members seemed “quite satisfied with”.

“This notification has been issued under Section 66 of the PMLA and has nothing to do with the GST law. It has been issued as it is a requirement of the Financial Action Task Force and our evaluation is under process,” he said.

Dispelling doubts that the GSTN is now going to share information about private businesses with other law enforcement agencies, including the ED, Mr. Malhotra said the ED will neither be receiving nor providing information.

“It was also clarified that this notification will empower our tax authorities with more information. The director of the Financial Intelligence Unit will provide information to the GSTN to empower the authorities wherever it feels there is a chance of tax evasion or money laundering; this information can be used as they deem fit,” he said.

The GST rate on uncooked, unfried snack pellets and fish soluble paste was slashed from 18% to 5%, while imitation zari threads or yarn will now attract 5% GST instead of 12%. The Council also decided that food and beverages consumed inside cinema halls shall attract 5% GST without any input tax credits, as opposed to 18% levied on cinema services.

The tax treatment on SUVs, which attract a higher GST compensation cess on top of the 28% GST levy, was also clarified taking into account concerns expressed by Tamil Nadu and Punjab that the higher cess levy must not affect sedans.

“Till now, for a vehicle to be categorised as SUV with higher compensation cess — four conditions had to be met. They had to be generally considered an SUV, were longer than four metres, with an engine of 1500 cc or more, and a ground clearance of 170 mm,” said the Revenue Secretary.

The Council has decided to scrap the condition that the vehicle should be popularly seen as an SUV, and clarified that the ground clearance of 170 mm should be of an unladen vehicle.

“On services, we have offered exemption on GST for satellite launch services provided by private organisations,” Ms. Sitharaman said.