Delta Corp shares rose after the Supreme Court agreed to hear the online gaming industry’s appeals on January 10 about GST-related issues. The industry is challenging notices from the Directorate General of GST Intelligence (DGGI), which have resulted in a huge tax demand of Rs. 1.12 lakh crore from 71 gaming companies. This news has given hope for a solution to the ongoing tax problems. The decision could have a big effect on the online gaming industry.
Delta Corp shares surged nearly 6% on Wednesday, January 8, after the Supreme Court agreed to hear pleas from the online gaming industry regarding Goods & Services Tax (GST) show cause notices on January 10.
The industry has raised alarms over notices issued by the Directorate General of GST Intelligence (DGGI), which have led to a tax demand of Rs.1.12 lakh crore from 71 online gaming companies. With potential penalties, this demand could rise to Rs.2.3 lakh crore, creating significant pressure on the sector.
Read Also: SC to Hear Pleas Against 28% GST on Online Gaming Companies in July
Gaming companies have voiced concerns about possible coercive actions from tax authorities, as this issue has remained unresolved for several years. They are seeking a stay on the show cause notice and challenging the retrospective application of a 28% tax on the total face value of entry fees, introduced through an amendment to the CGST Act in August 2023. This amendment is retroactive to 2017, which prompted the issuance of the show cause notices.
In May 2023, the Karnataka High Court annulled a Rs.21,000 crore notice issued to Gameskraft; however, the Supreme Court issued stay this ruling in September 2023.
In August 2023, the GST Council amended the law to specify that all online games involving bets, regardless of whether they are based on skill or chance, would incur a GST rate of 28% on the total value of the bets placed, rather than on the gross gaming revenue, effective from October 1.
Following this decision, online gaming companies have received tax demands, which experts warn could severely impact the entire industry.
The Goods and Services Tax (GST) on online gaming companies in India has become an important topic for both the government and the gaming industry. Online games are divided into two types: skill-based games and games of chance, and GST is applied differently to each. Skill-based games are taxed at 18% on the platform’s earnings or revenue, while games of chance, like gambling, are taxed at a higher rate of 28% on the total amount bet.
In 2023, the GST Council suggested applying a 28% tax on the full value of bets for all online games. This change aims to make the tax system simpler but has raised concerns in the industry about its impact on business growth and attracting investments in India’s fast-growing online gaming market.
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