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India’s GST Council has approved an amendment to tax legislation that could free the nation’s gaming companies of billions of dollars in catastrophic goods and services tax (GST) back notices.
The GST Council’s support for a waiver on retrospective tax and associated penalties and interest means that the amendment of the Central Goods and Services Tax Act 2017 will be put to parliament, likely in the current session.
Passage of the amendment would annul retrospective tax notices sent by the Directorate General of GST Intelligence (DGGI), a change that could amount to salvation for online gaming companies struggling with an effective retroactive 28 percent tax rate on customer deposits.
By last October, the DGGI had sent delinquent GST notices to land-based and online gaming listco Delta Corp alone amounting to $2.8bn.
Similar bankruptcy-level notices totalling more than $9bn have been sent to fantasy operator Dream Sports, online skill gaming platform operator Gameskraft Technologies and other online gaming operations.
During a meeting in New Delhi on Saturday (June 22), the council agreed that back GST payments may be inappropriate and waivable in circumstances where “common trade practices” rendered the tax a death blow.
An inserted Section 11A would “allow regularisation of non-levy or short levy of GST, where tax was being short paid or not paid due to common trade practices”, the council said in a press release.
The amendment applies across the corporate spectrum and not exclusively to gaming operators, raising possibly inconsistency in government discretion when waiving GST notices.
The council’s decision follows its legal subcommittee’s recommendation last week to proceed with the amendment.
Industry hopes that the GST Council would discuss a lowering of the GST rate of 28 percent on the industry, or taxing gross gaming revenue instead of initial customer gaming volume were dashed, however.
The GST on initial deposits remains a threat to the viability of smaller gaming companies and to the margins of larger interests.
The GST’s likely severe damage to the nascent regulated gaming industry has met with protest at senior political levels, both within the GST Council and among state-level politicians.
Industry observers are hopeful that the government will make this change in time as a matter of policy, or else be forced to do so by the Supreme Court of India, which will hold final hearings into the legality of GST tax rates for gaming in July.
