Ahead of GST council meet, Atishi warns that e-gaming firms will be shut down due to tax evasion notices.

Delhi Finance Minister Atishi appeals for withdrawal of tax evasion notices issued to online gaming companies

Delhi Finance Minister Atishi on Saturday said the issuance of tax evasion notices totaling ₹1.5 lakh crore to online gaming companies could potentially cripple them. She expressed her intention to appeal for the withdrawal of these notices during the 52nd meeting of the Goods and Services Tax (GST) Council today.

“Valuation of online gaming companies is ₹23,000 crore while ₹1.5 lakh crore tax evasion notices were sent to companies of the online gaming industry. I will seek a withdrawal of tax notices in today’s GST council meeting,” said Atishi, PTI reported.

Safeguarding the industry from adverse effects

Atishi argued that retracting these notices is essential to safeguard the industry which is “already facing adverse effects of imposition of a 28 per cent tax.” She added that an “unstable and erratic tax environment” could discourage foreign investors from entering the online gaming industry, thereby affecting the overall startup ecosystem in the country.

Amendments to GST laws

In its 51st meeting held on August 2, the GST Council proposed amendments to the GST laws, clarifying the 28 per cent taxation on casinos, horse racing, and online gaming. These amendments became operational on October 1, after post-approval by Parliament in the monsoon session.

Online gaming companies facing tax evasion notices

However, in recent weeks, several online real-money gaming companies have received show-cause notices for allegedly evading taxes, believed to stem from these GST law amendments. Play Games 24X7, which operates RummyCircle My11Circle, received notices for ₹21,000 crore, while Dream11, a fantasy e-sports firm, received a notice for ₹28,000 crore.

According to a Live Mint report, tax demands cumulatively amounting to ₹1.5 trillion are expected to be issued to online gaming companies for alleged underpayments for several years.

Concerns over retrospective taxation

While the amendments have become operational this month, the notices appear to pertain to the period preceding the amendments. Tax officials have calculated the dues by applying a 28 per cent tax to the full value of bets placed.

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