AIGF encourages the government to postpone the implementation of a 28% GST on real-money gambling.

AIGF encourages the government to postpone the implementation of a 28% GST on real-money gambling.

The 28% GST on real-money gambling is expected to go into effect on October 1; however, certain states have failed to alter their GST regulations.

According to Moneycontrol, the All India Gaming Federation (AIGF), an industry body that represents the country’s top skill gaming firms, has approached the finance ministry to request a suspension of its recent notification on a 28 percent goods and services tax (GST) being implemented on online money games beginning October 1.

The finance ministry said on September 29 that the effective date for the adoption of new GST rates will be October 1, as planned. Despite the fact that a dozen state governments have yet to pass the necessary adjustments to their various state GST statutes, this is the case.

In a letter dated September 30 to Revenue Secretary Sanjay Malhotra, AIGF CEO Roland Landers stated that these notices constitute a “severe blow to the creed of ‘one nation, one tax.'” and will rip “the fabric of GST” apart.

It may also “open the floodgates of unilateral actions by various states in various other aspects of GST in the future,” he warned. A copy of the letter has been reviewed by Moneycontrol.

The AIGF claims to have approximately 120 members, which include skill-gaming firms and game developers from many formats and genres. Mobile Premier League (MPL), Gameskraft, Nazara Technologies, Deltatech Gaming, Head Digital Works (A23), and WinZO are among its significant members.

The industrial group has asked that the new tax regime be delayed until all states enact their respective adjustments in accordance with the GST scheme and until the Supreme Court issues its decision.

In the coming weeks, the Supreme Court will hear the tax department’s alleged Rs 21,000 crore GST evasion case against skill gaming giant Gameskraft for a final hearing.

The Supreme Court postponed the Karnataka High Court’s decision to overturn the GST department’s show-cause notice on September 6. Other skill gaming companies received a flurry of retrospective tax notices as a result of this decision in the following weeks.

According to Moneycontrol, Dream Sports, the parent business of fantasy sports giant Dream11, has filed a writ appeal in the Bombay High Court challenging a show cause notice issued by tax officials.

Skill gaming CEOs and legal experts have already told Moneycontrol that an unfavorable verdict from the Supreme Court might be the final nail in the coffin for the business, which is already hurting under the 28 percent GST system.

“Changing interpretation of taxation, retrospective tax notices, and changing policies have made most businesses unviable and the otherwise difficult journey of entrepreneurship, almost impossible to endure for startups in online gaming” remarked Saumya Singh Rathore, co-founder of Win

Tax quandary

According to an AIGF spokeswoman, with the current GST implementation, real-money gaming enterprises face a tax quandary.

Companies in states that have not modified their GST legislation must levy the central GST (CGST) but not the state GST (SGST), whereas companies in states that have amended their GST laws must levy both the CGST and the SGST.

“The companies will have to deal with the uncertainty brought on by this scenario on top of the massive changes they must make in their operations.” In this light, the industry hopes that the government will take notice of the situation and provide the industry adequate time to adjust,” the representative added.

According to the letter, such a situation would result in various amounts of taxes being collected and deposited across the country, as well as a “complete breakdown of the very structure of GST.” It is also unclear how technical systems will be updated to deal with this “anomalous scenario,” according to the industry association.

The letter also expressed concern about the hurried implementation of the reforms, which has left numerous provisions ineffective and may expose real-money gambling enterprises to extra operational and legal issues.

According to a recent FICCI-EY estimate, the real-money gaming segment would account for 77 percent of India’s gaming sector revenues in 2022, which will stand at Rs 13,500 crore. According to the research, it is expected to expand to Rs 16,700 crore in 2023 and Rs 23,100 crore in 2025.

The GST Council resolved in July 2023 to impose the top GST slab of 28 percent on the whole face value, regardless of whether it is a skill or chance game.

On August 2, it provided some respite by suggesting that GST be paid on deposits rather than bets, in order to avoid double taxation. Platform costs for real-money gambling sites are now subject to an 18% GST.

The council, led by Finance Minister Nirmala Sitharaman, stated that the decision would be reviewed six months after it was implemented. The next GST Council meeting is set for October 7.

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