In a significant development, Nazara Technologies has announced that two of its subsidiaries, Openplay Technologies and Halaplay Technologies, have been served with show cause notices from the Director General of GST Intelligence, Kolkata. These notices collectively impose a GST liability of nearly Rs 1,120 crore for the period from 2017-18 to 2022-23.
Openplay Technologies has been slapped with a proposed liability of Rs 845.72 crore, while Halaplay Technologies faces a tax demand of Rs 274.21 crore under the CGST Act, 2017. The crux of the issue lies in the calculation of GST based on the sums pooled by players rather than the gross gaming revenues.
These subsidiaries are currently consulting with legal counsels and tax advisors to chart their future course of action. Despite the substantial tax claims, it is noteworthy that for the quarter ending March 2024, these subsidiaries contributed less than 2% to Nazara’s revenues and less than 1% to its profit.
The GST Council had clarified in August that a 28% Goods and Services Tax (GST) would be levied on the full value of bets placed on online gaming platforms. This clarification has led to a surge in GST claims against online gaming companies. Last year alone, GST officers issued around 71 show cause notices for alleged GST evasion totaling over Rs 1.12 lakh crore during the financial years 2022-23 and 2023-24. Many of these cases are currently pending in court as the companies challenge the notices.
Nazara Technologies, in its filing with the BSE, reiterated its commitment to resolving the matter in consultation with legal and tax experts, aiming to ensure compliance while protecting its business interests.
The impact of these GST claims on the online gaming industry underscores the need for clarity and consistency in tax regulations, as companies navigate the complexities of compliance in a rapidly evolving digital landscape.
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