The Central Board of Indirect Taxes and Customs (CBIC) has determined that online money gaming companies are subject to an additional tax liability of approximately ₹45,000 crore. Since the implementation of the Goods and Services Tax (GST) in 2017, these companies have paid at an 18% rate on their gross gaming revenue, claiming to be games of skill rather than the prescribed 28% rate for games of chance. However, the differential taxation treatment between games of skill and chance has now been abolished. The CBIC estimates that the gaming industry alone has evaded ₹45,000 crore in taxes.

The Directorate General of GST Intelligence (DGGI) is currently in the process of issuing notices to the online gaming companies. While the industry has paid less than ₹5,000 crore in GST since 2017, the actual tax liability is believed to exceed ₹50,000 crore. This also includes offshore gaming companies, which have avoided paying over ₹12,000 crore in taxes, as well as the ₹21,000 crore demand issued to Gameskraft.

Recent amendments to the Central Goods and Services Tax (CGST) have provided clarity on the GST liability of online gaming companies, establishing a universal 28% rate for all such companies. This amendment has led to the Centre filing a special leave petition in the Supreme Court, appealing against the Karnataka High Court’s decision to dismiss the tax demand imposed on Gameskraft by the DGGI.

Previously, there had been an ongoing debate regarding whether online gaming should be categorized as games of chance or games of skill, with the former attracting a 28% GST rate. Some online gaming companies argued that their services were games of skill and should therefore be subject to an 18% tax rate. However, the GST Council has made it clear through amendments to the GST laws that there will be no distinction between the two, and a 28% tax rate will be applied to the full face value of bets.

It is important to note that the industry has requested that the changes not be applied retroactively.