The Directorate General of Goods and Services Tax Intelligence (DGGI) has issued show-cause notice for a tax demand of over ₹21,000 crore to a Bengaluru-based online gaming company. This is probably the biggest demand in the history of indirect taxation.

Sources confirmed to BusinessLine that the company is Gamescraft. It runs platforms such as Rummy Culture, Rummy Platform and Rummy Partner.  It also claims to be “India’s first gaming company to build an ISO-certified gaming platform and has the Guinness World Record for organising the world’s largest online rummy tournament”.

One of sources, however, said that the there was no tournament as such and people betted on the platform. “Face value of total bet was ₹77,000 during 2017 and 2022. Since it was game of chance, so rate of 28 per cent was applied, and after penalty the total amount comes at over ₹21,000 crore, for which the show-cause notice has been issued.”

Further, he clarified that it is beginning of the process. Normally assessess are given 30 days’ time to reply to notice and then the matter is taken forward.  “Of course, the company has all the rights to challenge the demand at various levels, starting from first level of appeal to the High Court and the Supreme Court.”

There is two-tier rate structure for online gaming — 18 per cent in case of game of skill and 28 per cent in case of game of chance. Most of the online gaming companies levies GST at 18 per cent. This issue comes at a time when a Group of Ministers is fine-tuning its recommendation on the GST rate, along with a base on which tax is to be levied for online gaming, casinos and horse racing. Initially, GoM recommended rate of 28 per cent for all three, and this was to be applied on Gross Gaming Revenue (GGR). However, there was some differences in the GST Council and so the GoM was asked to rework it. Now, GoM is taking legal opinion. Once GoM finalizss the report, it will be considered by the GST Council in its next meeting scheduled to take place in Madurai most likely next month.

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