GST relief for gaming companies raises hopes across the sector

Mumbai: Tax authorities have taken a benign view on at least four gaming companies going by the first few final orders issued till now.

No personal penalties were slapped on company directors and tax demands have been slashed following the Supreme Court (SC) verdict on a bitter feud waged by real money gaming (RMG) and casino companies with the goods and services tax (GST) office.

The online RMG firm, Pacific Gaming, run from Bengaluru with a registered office in Kolkata, received final GST demand of ₹100.8 crore as against ₹721 crore stated in the department's show-cause notice (SCNs) to the company. Delta Corp, a listed company operating casinos in Goa and Sikkim, together with two subsidiaries saw combined final GST demand reduced to approximately ₹117 crore compared with about ₹16,000 crore in SCNs. Final orders are issued by adjudicating authority, presided over by senior official of GST commissionerate.

However, the trade is keeping fingers crossed, waiting for remaining orders which are expected by October 14, the deadline set by apex court. More so, with adjudicating officers refusing to lower demands for two other RMG firms in Mumbai and Noida till they submit more information.

"The test case would be the demands on gaming biggies-Grameskraft, Dream11 and Games24/7-each of which were served GST notices for ₹20,000 crore or more," said an industry official. But what has come as relief is the absence of personal liability claims on promoters and directors. Properties, bank accounts and personal assets of directors of private limited companies can be attached under GST law if board members can't prove that tax default was not due to gross neglect, malfeasance, or breach of duty. While there was fear, some still believed the department would refrain from taking such steps.

"The revenue must first establish that dues are not recoverable from the company. Only thereafter, liability can be pursued against directors under section 89 of CGST Act. At that stage, the director concerned can establish that non-recovery was not on account of his or her gross neglect, misfeasance or breach of duty. The crucial question is whether a director's conduct contributed to non-recovery of dues, rather than whether the person was merely negligent in the company's overall affairs," said chartered accountant Ashish Karundia.

WAIVER REQUESTED

Nonetheless, a dozen RMG firm founders had jointly appealed to GST Council, a constitutional body, to spare them from personal liabilities. The industry, which had paid GST on gross margin till October 2023 as was the industry-wide practice then, has also requested the Council, which would meet on October 7, to waive tax demands by invoking section 11A of GST Act.

In the four cases mentioned, department has followed SC ruling which said GST can be charged only on a player's initial deposit, and not on winning amounts placed to bet again. Say, a player deposits ₹10,000, wins ₹2000, and bets ₹12,000 again; here, the firm is charged GST on ₹10,000 and not on ₹12,000. However, if the player withdraws, say ₹12,000, from the firm, and later deosits (say ₹7,000) to play again, the firm is charged GST on ₹7,000.

The final demands were based on 28% tax from July 2017 (when GST was introduced) to October 1, 2023-the period of dispute, except for intervening six-months, from July 2017 to January 24, 2018, when the applicable rate was 18%.