DGGI slaps a tax notice of $2.6 Billion (Rs 21,000 crore) on Bengaluru-based Gameskraft Technology for allegedly evading GST on the betting amount.
Why it matters: In response to a GST show-cause notice issued to one of India's most profitable gaming startups, an unprecedented outcry has erupted.
When users play a real-money game, the platform typically only takes 7-15% of the total pooled money as commission.
RMG firms currently pay 18% GST only on commissions, as do the majority of digital service providers, but the tax claim in Gameskraft’s case comes from a different categorization and calculation.
What happened: The legal departments of India’s gaming startups that run platforms where “real money” is wagered on the outcome of games like rummy and poker.
Gameskraft—is one of the leading real-money-gaming (RMG) companies and among the most profitable startups in the country.
Context: The allegations leveled against the company concerned the majority of RMG firms. Claims arose as a result of inconsistencies in the company's invoices.
By openly supporting Gameskraft, the companies did not want to invite the ire of the GST authorities, that the tax department might come after their own huge interests and fortunes next was a later thought
Between the lines: RMG products, such as fantasy sports and online card games, are extremely popular in India, with operators such as Gameskraft, MPL, Dream11, and Games24x7 boasting user bases in the tens of millions.
These businesses are frequently compared to gambling operations, which exposes them to legislative action in several states.
What's Next: The fact that the largest companies rarely belong to the same industry associations demonstrates the sector's antagonism.
The absence of federal legislation or regulations has also been detrimental. State prohibitions frequently target only a few games.
If these measures are not implemented, they will either have to prepare for the demise of a profitable industry or expose consumers to exploitative practices.
The bottom line: The measures are necessary to be implemented to prevent exploitative practices but there is also a need for the legislature and executive to take into consideration the possibility of arbitrariness.