Major tax crackdown on online gaming firms in India; Rs 21,000 cr GST notice sent to GamesKraft

In a move that signals a major crackdown on online gaming operators in India, the Directorate General of GST Intelligence (DGGI) has begun the process of issuing notices to all such companies in the country.
 
Confirming this, official sources said the tax authorities are of the view that online gaming companies in India have allegedly conducted massive tax evasion in the past few years.
 
“The Bengaluru wing of the DGGI has issued show cause notice to online gaming company GamesKraft Technology Private Ltd for an amount of Rs 21,000 crore," the source said.
 
The sources added that the Karnataka High Court has stayed the demand notice and proceedings are underway at the court.  
 
Interestingly, the DGGI has informed the Court that it is carrying out similar proceedings against the entire online gaming industry in India.
 
“The department is expecting to recover nearly Rs 2.5 lakh crore in taxes from the online gaming companies," the source added.
 
Recently, the Supreme Court also issued notices to skill-based gaming companies and agreed to hear a plea by the Karnataka government challenging the High Court judgment, which struck down provisions of law prohibiting betting in online gaming.
 
The GST Council, which is expected to hold its 48th meeting in October, is deliberating the parameters of taxing online gaming, with the key question being whether to tax the entire bet at face value or the net amount after reducing the prize money.  
 
News reports cited the company spokesperson as saying the notice was a departure from the well-established law of the land. The company said it has discharged its GST and Income Tax liabilities as per standard industry practice and is confident that it will be able to respond to the notice to the full satisfaction of the authorities.
 
Incidentally, the DGGI has also cracked down on cryptocurrency exchanges in India on the grounds of alleged GST evasion.