What is the definition of Retrospective Taxation?
“Retrospective” refers to actions taken from a prior date, and “tax” refers to a new or additional tax levy on a specific activity. It is a combination of “retrospective” and “tax.” So, retroactive tax involves imposing a further fee or levy of tax as a result of a change made from a defined date in the past.
Which gaming companies have received Retrospective Taxation?
Dream11, an Indian fantasy sports website, has gotten a GST notice for more than Rs 25,000 crore, making it the country’s highest indirect tax notice. The number of letters is anticipated to rise as gaming companies prepare for the implementation of a 28% GST on October 1. Gaming companies are projected to generate a total GST demand of Rs 1 lakh crore. As an actionable claim, Dream 11 has been accused of levying and recovering discriminatory GST on the contest entry money, which includes the platform charge and prize pool amount. The corporation emphasised that it could not be charged GST on actionable claims since it was neither a supplier nor the recipient of the claim.
How was the Rs 55,000 Crore amount calculated?
Since 2017, the Directorate General of GST Intelligence (DGGI) has computed the dues on real bets placed on websites. “In the case of Dream11, chances worth 1 lakh crore were made, resulting in a GST of 28,000 crore or more,” claimed an official familiar with the situation. Gaming companies such as Games24x7 Pvt Ltd. and affiliates made almost 71,000 crores of bets, generating a GST of 20,000 crores or even more, based on ET officials.
GST has been assessed on each wager placed on the site, according to the official. “So even if a player lays four bets amounting to ₹100, GST of 28% will be charged each time a bet is laid,” said the individual.
How will gaming companies retaliate to this tax?
Dream 11, the largest tax notice recipient, has filed a petition with the Bombay High Court this week, disputing the authorities’ show cause notifications for suspected GST evasion. The notifications charged GST evasion of 28% on the amount charged for offering gaming services to consumers for the fiscal years 2017-18 and 2018-19.
Whereas other gaming companies can appeal GST allegations against them to the adjudicating authority (AA), but they must pay 10% of the claim amount, up to a limit of Rs 100 crore. Industry leaders petitioned the government over GST demands, claiming that the demand is three to four times their revenue and that they would be forced to close their doors. They said that there is no way to track down customers and ask them to pay the GST bill right now; thus, the dues must be paid by the businesses themselves. The Centre argues that fantasy games should be taxed at a rate of 28%.
What gaming companies can face in the future?
Executives in the real-money gambling business anticipate that the DGGI formula, which taxes deposits each time a wager is placed, may boost tax liabilities by 1,300-1,400% each year. These platforms now pay 18% of the commission levied on player deposits. According to the CEOs, the GST Council’s suggested taxing technique on deposits may boost the tax burden by 400% each year. The specific procedure is unknown.
What could cause issues for the real-money gaming business is that the sum will be subject to an 18% interest rate computed for each fiscal year, as well as a penalty if the adjudicating body feels it necessary to apply one.
