The finance ministry has notified that the 28% Goods and Services Tax (GST) levy on casinos, online gaming and horse racing has come into effect from October 1.
The notification comes despite some states not having passed the necessary laws in their respective assemblies to implement the new tax rate.
The latest notification has been issued to implement the amendments brought in the Central GST (CGST) Act and the Integrated GST (IGST) Act, last month.
As per the changes to the CGST Act, the transaction with respect to online gaming will henceforth be treated as “actionable claims” similar to lottery, betting, and gambling and will be subject to 28% GST on the full face value of bets.
The amendments to the IGST Act make it mandatory for offshore online gaming platforms to register in India and pay taxes in accordance with domestic law.
The notification comes amid a stand-off between the gaming industry and the GST authorities, and the rising number of court cases.
In the past few weeks, several notices of tax evasion have been issued by GST authorities to online gaming companies.
Last week, Dream Sports, the parent company of Dream11 filed a writ petition in the Bombay High Court challenging a GST notice that alleged the evasion of reportedly over Rs 25,000 crore.
Prior to that, Delta Crop was served a tax notice amounting to `1,140 crore on similar grounds.
In September, the Supreme Court had stayed the Karnataka High Court’s ruling, which quashed a GST notice against online gaming company Gameskraft for alleged tax evasion to the tune of `21,000 crore.
On the recent amendments, Saurabh Agarwal, tax partner, EY, said that it is crucial for online money gaming companies to comply with the new GST regulations in order to avoid any penalties in the future.
“Online money gaming companies must register for GST and file monthly returns, as per the recent amendments made to the GST law.
“Once registered, companies will need to align their accounting systems to comply with the new requirements. They will also need to create a data repository to store customer information and other data required for undertaking GST compliances in India for a specified period of time,” he said.
In the 51st GST Council, it was decided that a review of the new law would be carried out after six months of its implementation.