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India’s online gaming sector, once hailed as a burgeoning industry, now finds itself entangled in a complex tax dispute. The Directorate General of GST Intelligence (DGGI) has issued a ₹5,712 crore tax demand to Paytm’s subsidiary, First Games Technology, asserting a 28% Goods and Services Tax (GST) on total entry amounts from January 2018 to March 2023. This move aligns with a broader trend, as over 70 similar notices totaling ₹1.12 lakh crore have been dispatched to various gaming firms and casinos.
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The crux of the matter lies in the retrospective application of the GST amendment effective from October 1, 2023, which mandates a 28% tax on the full face value of bets, irrespective of whether the game is of skill or chance. Gaming companies, including First Games, argue that this retrospective imposition disrupts financial planning and undermines investor confidence. They contend that legitimate skill-based games should be taxed at 18% on gross gaming revenue, aligning with international norms.
The Supreme Court has intervened, granting interim relief by staying proceedings on these tax notices and scheduling a final hearing for May 5, 2025. This legal battle underscores the need for clear and consistent tax policies in the rapidly evolving online gaming industry.
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