Online money gaming firms face massive Rs 45,000 crore tax demand after 28% GST levy

Online money gaming firms, previously positioning themselves as offering skill-based games, face potential additional tax dues of around Rs 45,000 crore, according to an ET report. The Central Board of Indirect Taxes and Customs (CBIC) has evaluated unsettled GST liabilities for these firms since 2017.

Officials in the ET report explained that these companies were taxed at 18% on gross gaming revenue due to their skill-based games, instead of the legally prescribed 28%, resulting in a Rs 45,000 crore tax shortfall. The differential tax treatment between skill and chance-based games has been done away with.
The categorization of online gaming as either chance-based or skill-based has long fueled debate. Some online gaming companies have argued that their services pertained to skill-based activities, warranting an 18% tax rate instead of the 28% rate for chance-based games. On July 11, the GST Council amended laws to nullify this distinction, mandating a uniform 28% levy on the total bet value.

A senior CBIC official disclosed, “Our internal assessment says that the gaming industry alone has paid ₹45,000 crore less tax since the implementation of GST.” The Directorate General of GST Intelligence (DGGI) is in the process of sending notices to these companies.
Real money gaming firms dominate the online gaming domain by approximately 77% share and have oaid less than Rs 5,000 crore in GST since 2017. However, the actual tax liability exceeds Rs 50,000 crore, the report said. This includes offshore gaming entities, with evasions surpassing Rs 12,000 crore, and the Rs 21,000 crore levy on Gameskraft.
This month, the Centre filed a special leave petition in the Supreme Court challenging the Karnataka High Court’s decision that revoked the DGGI’s tax demand notice on Gameskraft.
The official quoted above said that the latest CGST amendment has made the position very clear in terms of the GST liability of online gaming companies. “Every online money gaming company will attract 28% GST and has to pay the balance tax,” the official said.
Parliament approved changes to the CGST and IGST laws on Friday, enacting the council’s modifications. The industry has urged for the non-retrospective application of these amendments.