Businesses can now enter their GSTIN (Goods and Services Tax Identification Number) while making purchases on the Blinkit platform, thanks to a new feature. Albinder Dhindsa, the CEO, claims that this change is a reaction to consumer demand, especially from companies buying expensive goods like electronics. Businesses can now claim up to 28% in GST input credits for their purchases, thanks to the introduction of GST invoicing.
With the new feature, users may now enter their GSTIN directly into the Blinkit app and receive invoices that are GST-compliant. This is particularly crucial for companies that wish to use GST input credits to reduce overall expenses. For instance, if a business makes purchases at the 28% GST rate, it can claim a portion of those purchases as input credit.
What is GSTIN?
Each taxpayer (GST-registered business, firm, dealer, supplier, or business entity) receives a 15-digit unique identification number known as the Goods & Services Tax Identification Number, or GSTIN, after registering under the GST regime in India.
Every company operating in a state or Union territory receives a unique PAN, state information, and a Goods and Services Tax Identification Number (GSTIN). Businesses and individuals must register with the state government and get a unique 15-digit GSTIN in accordance with the GST Act of 2017. Several GST-related processes, including filing returns, claiming input tax credits, and making tax payments, require the GSTIN Number.
How New GST Invoicing Will Work in Blinkit?
Upon checking out, customers will be presented with the option to
“Add GSTIN.”
A GST-compliant invoice is created for the transaction as soon as the
GSTIN is added.
The buyer’s GST input credit, which may reach up to 28% depending on
the product category, is shown on the invoice.
People’s Reaction
The founder of Blinkit, Albinder Dhindsa, recently announced on LinkedIn the introduction of a new tool that enables companies to include their GSTIN while making transactions. The new feature responds to the increasing need for GST-compliant invoices among Blinkit’s business clients, which are essential for making decisions, especially for expensive transactions.
Users responded enthusiastically to the news, praising the company’s recent launch. A significant turning point in Blinkit’s development, Dhindsa’s action solidifies the platform’s position as a major force in the B2B market. An enthusiastic user left a comment on the post, saying, “That’s great news! Adding a GSTIN is a useful feature, particularly for companies making expensive purchases. It will undoubtedly streamline the invoicing process and make it easier for customers to obtain tax benefits. I’ll try it out and let you know what I think shortly. Thank you for putting the needs of your customers first.”
The declaration by Dhindsa shows the company’s intention to meet the needs of its business clients, many of whom depend on GST-compliant invoices for accounting accuracy and tax advantages. He urged users to give the function a try and report back.
According to media reports, the goods and services tax authorities have warned large payment aggregators like BillDesk and CCAvenue, requesting GST on the cost they charged merchants for processing digital transactions under INR 2,000.
Vishwas Patel, the joint managing director of Infibeam Avenues, which runs the payments processor CCAvenue, confirmed to the media that the company had indeed received a show-cause-cum-demand letter. He assured them that their teams had addressed the notification.
The value of digital payments in India is less than INR 2,000 in over 80% of cases. In response to a government notice given after demonetization in 2016, payment aggregators have not been collecting taxes from merchants for the services they rendered during these transactions.
Since the implementation of the GST regime in fiscal 2017–18, the government has been actively pursuing tax revenue. Additionally, this is happening right before the GST Council meeting next week, when rumors are circulating that they will issue a clarification on how to tax these types of transactions.
Massive Undertaking
The message has already reached some of the participants. According to the CEO of another payments company, “we are anticipating notices too” because, by government regulations, no one in the business charged merchants or paid GST on digital payments under INR 2,000.
Although the precise amount of GST being asked could not be determined by media reports, the CEO of a payments firm estimated that enterprises processing billions of dollars worth of transactions annually could face tax claims totalling several hundred crore rupees for all these years.
According to sources within the sector, merchants usually have the tax component collected from them when they pay their fees. According to their reasoning, the government would have to recoup the GST from the businesses that receive the payments if it demands it from payment processors.
The Issue Only With Debit Cards, Credit Cards, and Net Banking
The problem solely applies to online banking, debit, and credit transactions. As per official directives, the government has eliminated the merchant discount rate and transaction cost for RuPay and the Unified Payments Interface (UPI).
According to sources within the industry, to comply with a government notification from December 8, 2016, the aggregators, who offer payment solutions for both online and retail merchants, did not charge GST.
During demonetization, a notice was issued regarding services provided by acquiring banks to individuals regarding the settlement of amounts up to two thousand rupees in a single transaction using various payment card services (not including charge cards, credit cards, or debit cards).
According to media reports, the GST Council might take into consideration a plan to charge payment aggregators (PAs) 18% GST for digital transactions with a minor value of up to INR 2,000 that are made through debit and credit cards during their upcoming meeting.
Following the overnight demonetization of 500 and 1,000 rupee notes in 2016, the government implemented measures to enhance digital payment systems. The service tax was not applied to debit and credit card transactions that were less than INR 2,000, which was a crucial step. To aid in the country’s transformation to a digitally empowered economy, this measure sought to encourage more individuals to switch from paying with cash to using cards. This occurred in December 2016, far before the Goods and Services Tax was implemented in July 2017.
Updated Plan: Goods and Services Tax for Payment Aggregators
Now, according to updated information circling, the GST Council is considering what amounts to a major shift. When it comes to fees charged by payment aggregators for debit and credit card transactions, they might think about implementing an 18% GST. Such costs for transactions below INR 2,000 have previously not been applied.
The standard range for payment gateway fees is 0.5% to 2% per transaction, with the majority charging approximately 1%. Payment aggregators will most likely charge merchants the new GST on top of these fees.
“If this tax is imposed, it will hurt small businesses which generally have low-value transactions…” said a prominent fintech executive in the payments field, speaking to a renowned media house. The payment processors will simply forward the information to the companies and vendors.
The Absence of the UPI
There may not be much of an effect on digital transactions as a whole because UPI is already the most used digital payment method, particularly for transactions with low values. The volume of transactions processed by UPI surpassed 131 billion in FY24, an increase of 57% year-over-year.
More than 80% of all digital payments made in India’s retail sector currently go through UPI. Keep in mind that this GST is exclusive to online purchases paid for using a credit or debit card. The fee will not impact Unified Payments Interface (UPI) transactions because there is currently no Merchant Discount Rate (MDR). As a result, UPI continues to be an appealing payment option for both customers and retailers for transactions up to INR 2,000, as it does not incur any fees.
Effects on Small Companies
The additional 18% tax on payment gateway fees would not be too much of a problem for retailers who deal in high-value transactions. However, this can have a more noticeable effect on small enterprises that deal in frequent low-value transactions.
Picture this: the merchant pays INR 10 for a 1% payment gateway fee, on top of the 1,000 transaction. This is how the present system works. This price would grow to INR 11.80 after the planned GST—a small increase, but one that can build up rapidly over hundreds of transactions.
Way Forward
The disparity in tax treatment between UPI and debit/credit cards can cause shoppers and businesses to reevaluate their preferences, especially as UPI transactions continue to grow in popularity owing to their zero-cost nature. To keep digital payments everywhere accessible and reasonable, we’ll need to strike a balance.
Zomato, a food-tech giant, has received a tax demand and penalty order totaling over INR 3.5 lakh, adding to the flood of goods and services tax (GST) warnings it has already been receiving.
On August 31st, Zomato announced in an exchange filing that the Sales Tax Officer of Delhi’s Ward 300 had issued an adjudication order, increasing the GST demand to INR 1.89 Lakh plus interest of INR 1.59 Lakh and any applicable penalty, the amount of which was not specified. The company headed by Deepinder Goyal claimed that it received the GST notification “disputing the eligibility of the input tax credit and interest penalty thereon.”
The filing indicated that the GST demand notice was issued for the period beginning in April 2019 and ending in March 2020.
The Second Notice in a Week
Zomato has been hit with a demand and penalty order for the Goods and Services Tax (GST) for the second time this week. GST notices for around INR 4.59 crore were received by the company on 29 August 2024 from the authorities in Tamil Nadu and West Bengal. Zomato has stated that it intends to proceed with an appeal against the most recent tax demand order, even though it previously stated that it would file an appeal against the previous tax demand orders before the applicable judicial body.
The company stated in response to the most recent demand notice that “despite the fact that the company believes that it has a strong case on merits, the company shall pay the applicable amounts to the GST authorities.” This was in reference to the amount involved and the cost of litigation.
Zomato is now dealing with several tax concerns, which is an important fact to keep in mind. An INR 9.45 crore GST notice was sent to the food-tech major by the Assistant Commissioner of Commercial Taxes (Audit) in Karnataka. This notice was received by the company as of the previous month.
The Gurugram Goods and Services Tax (GST) authority issued a tax demand and penalty notice for INR 11.8 crore to the food delivery company in April, before that. These changes take place at a time when Zomato’s stock is increasing as a result of the company’s growing financial performance. The company’s net profit went from INR 2 crore in the previous year’s quarter to INR 253 crore in the first quarter of FY25. The value of Zomato’s stock has increased by about 102% so far this year.
A new requirement that requires sellers on Flipkart to authenticate their goods and services tax identification number (GSTIN) via an OTP (one-time password) authentication procedure has left many vendors confused.
According to sellers, Walmart-owned Flipkart may be attempting to obtain their private GST data while posing as a verification procedure to get sellers’ GST credentials. Sellers further claim that no rationale has been given for starting the process.
After vendors provide Flipkart with the OTP, the company can access their data through an API. All data collected before GSTIN registration would be available to the company.
Merchants’ yearly turnover and sales on competing marketplaces like Amazon and Meesho can be found in the data, according to many merchants who spoke with the media. In addition, sellers shared a message they got from the company asking customers to authenticate their GSTINs using an OTP to avoid possible location blocking.
Flipkart’s Clarification
The One-Time Password (OTP) that sellers provide on the platform is a one-time process, according to a statement released by Flipkart. This process is designed to authenticate that the GST registration number belongs to a specific seller who is conducting business through Flipkart.
Additionally, it is designed to prevent any unauthorized individual from manipulating a seller’s GST number. An official spokesperson for the corporation stated that this does not grant them access to the information that they have included in their GST reports.Even though
Sellers’ Counter on the Above Clarification
However, sellers have mentioned that Flipkart already validates their GST paperwork, PAN, and Aadhaar data during the initial setup phase. This is something that vendors have mentioned in a media report. Even though it is still reasonable to request OTP verification from new vendors, there is no justification for requiring existing merchants to go through the system.
There are some vendors who have granted access to OTP to Flipkart because they do not want their sales over the holiday season to be negatively affected. An effort to steal data appears to have been made here. These procedures are not followed by any of the other marketplaces, including Myntra, which is owned by the Flipkart Group.
Those who are knowledgeable in the field of finance believe that if Flipkart claims that the OTP verification is a one-time operation, then they may only do so to validate the registration. However, the submission of an OTP by a seller does provide the company with access to the information that sellers have submitted on the GST portal. When it comes to sellers, their concerns are not completely unwarranted.
This Article has been contributed by Harsh Kumra and Sanjana Kumar, Associates with Spice Route Legal’s Corporate Practice Group.
In recent times, the boom in the startup industry has given rise to another parallel ecosystem that shares a symbiotic relationship with early-stage startups — this ecosystem being the ecosystem of ‘virtual office spaces’.
A “Virtual Office” is a cost-effective solution that offers a non-exclusive and non-dedicated office address to entrepreneurs, for the purposes of managing communication and legalities (such as business registration, goods and service tax (“GST”) registration and maintenance of records). Virtual office allows entrepreneurs to have a professional presence, without having to physically work out of such a premise.
Legal Considerations
Indian law does not prohibit the usage of virtual offices by entrepreneurs and establishments. In the limited cases where the judiciary has gotten involved in assessing the viability and legality of virtual offices, the stance taken by the authority has been in favour of virtual offices. Below are some of the legal considerations involved in setting up and operating virtual offices in India:
A. Requirements Under the Companies Act, 2013 (“Companies Act”):
The Companies Act requires all companies to have a registered office that is capable of receiving and acknowledging all communications and notices that may be addressed to them. The Companies Act does not create a distinction between physical offices and virtual offices. Section 12 of the Companies Act prescribes the conditions that must be fulfilled by a company for the purposes of its registered office, and some of these conditions are set out below:
(1). Companies are required to furnish to the Registrar of Companies (“ROC”) verification of its registered office within a period of 30 (Thirty) days of their incorporation in Form INC 22 (Notice of situation or change of situation of registered office) with supporting documents such as (i) the registered document of the title of the premises of the registered office in the name of the company, (ii) the notarized copy of the lease or rent agreement in the name of the company along with a copy of rent paid receipt, (iii) the authorisation from the owner or authorised occupant of the premises along with proof of ownership or occupancy authorisation, to use the premises by the company as its registered office, and (iv) proof of evidence of any utility service like telephone, gas, electricity, etc. depicting the address of the premises in the name of the owner, which is not older than 2 (Two) months.
(2). Every Company has to: 1. Paint or affix its name and the address of its registered office, and keep the same painted or affixed, on the outside of every office or place in which its business is carried on;
2. have the address of its registered office printed in all its business letters, billheads, letter papers and in all its notices and other official publications; and
3. publish the address of its registered office on the landing/home page of its website.
If the ROC has reasonable cause to believe that a company is not carrying on any business or operations, then the ROC is entitled to cause a physical verification of the registered office of the company, and if any default is found to be made in complying with the requirements, the ROC may initiate action for the removal of the name of the company from the register of companies.
(3). The Companies Act requires companies to maintain certain records and registers at their offices. These requirements would also extend to the companies operating through a virtual office. Some of these requirements include maintenance of copies of all incorporation documents (including the memorandum of association and articles of association), copies of annual returns filed by companies, and statutory registers (such as register of members (Form MGT-1), register of debenture holders or any other security holders (Form MGT 2), register of directors and key managerial personnel, register of charges (Form CHG-7), register of sweat equity shares (Form SH-3), register of employee stock options (Form SH-6) and register of loans, guarantee, security and acquisition made by the company (Form MBP-2)).
Under the GST Act, all companies that are over the threshold limit as mentioned therein are required to obtain a 15-digit GST identification number and a certificate of registration for each place of business. However, the GST Act does not make a distinction between virtual offices and physical offices. Virtual offices are subject to the same registration requirements under the GST Act as physical offices.
M/s. Spacelance Office Solutions Private Limited, in an application filed with the Kerela Authority For Advance Ruling Goods and Services Tax Department Tax Tower, Thiruvananthapuram (“Authority”), 1 while highlighting that leasing and maintaining full-fledged independent offices in big cities are unaffordable and unfeasible to most of the startup companies due to high rentals and related charges, raised the question as to whether GST registration is allowed for multiple companies from the same address, provided they follow all GST rules related to “principal place of business”.
While answering the question in affirmative, the Authority highlighted that there is no prohibition under the GST law for obtaining GST registration for a shared office space or virtual office, if the landlord permits such sub-leasing as per the agreement. The Authority further recognised that these offices are of greater benefit to travelling freelancers, small businesses, startups and even to the businesses that are operated from remote areas. Additionally, the Authority also stated that companies operating in virtual offices should provide to the relevant authorities, the rental agreement executed between the lessor and lessee, and in the event, there is any sub-lease arrangement, then the rental agreement between lessee and sub-lessee.
In addition to this, the companies should also provide a copy of the “monthly utility bill” in connection with payment towards electricity charges, water charges or other common services availed by the respective suit or desk number occupied by the company operating in the virtual office.
C. Shops and Establishments Framework
Compliance with the shops and establishments framework varies from state to state, given that each state has its separate shops and establishments legislation which contains different applicability thresholds, i.e., the minimum number of employees that should be employed by a company in an establishment for the legislation to be applicable to a company. For instance, while the minimum number of employees in the state of Maharashtra has been designated as 10 (ten) for the Maharashtra Shops and Establishment (Regulation of Employment Condition of Service) Act, 2017 to be applicable to a shop and/or an establishment in the state of Maharashtra, there is no qualifying threshold under the Karnataka Shops and Commercial Establishments Act,
Advance Ruling Number KER/55/2019 dated July 15, 2019
1961, resulting in the act to apply to every shop and establishment in the state of Karnataka.
The definition of “shop” and “establishment” includes any premises where any trade or business is carried on or where services are rendered to customers. The shops and commercial establishments framework applies to every office and shop where commercial activities are carried on. The license for a shop or an establishment is a license that gives an entity a legal identity in terms of carrying on trade or business. The Shops and Establishment legislation does not distinguish physical and virtual offices — accordingly, a view could be taken that even virtual offices would be covered under the ambit of Shops and Establishments legislation.
Global Virtual Office Market Size
How to Obtain a Virtual Office Space in India?
There are several service providers in India, such asAwfis, Spring House, IndiQube, The Playce and Cofynd, that provide virtual office spaces to entrepreneurs and startups, and other allied services in relation thereto. The services provided by such service providers include allowing the companies to use the premise as its registered office address, assistance with government-compliant documentation, GST registration, and handling of mail, documents and written communications.
Conclusion
In recent years, to adapt to today’s evolving technological landscape, many businesses have opted for a virtual office solution. One of the main advantages of a virtual office is that they are much more cost-effective than a traditional physical office. This enables entrepreneurs to keep business expenses low as on account of reduced costs of commuting and transportation, office equipment, office maintenance and utilities and other such associated costs of a physical office.
While virtual offices are ideal for new-age entrepreneurs and small-scale companies, this model might not be suitable for medium to large-scale companies, given that such companies would have increased legal compliance burden (in terms of maintaining documents and records, and facilitating statutory inspections); would require a larger workforce; and would have to place reliance on, on account of increased operations, physical meeting rooms and offices.
A virtual office is a cost-effective solution providing a non-exclusive and non-dedicated office address for entrepreneurs.
Are virtual offices legal in India?
Yes, virtual offices are legal in India. The Companies Act, 2013, and Goods and Services Tax Act, 2017, do not distinguish between physical and virtual offices.
Which virtual office service providers are available in India?
Some of the best virtual office service providers in India are:
The recent imposition of a 28% GST on fantasy gaming apps in India has disrupted the industry, particularly during the Indian Premier League (IPL) 2024 season.
This unexpected move has hindered marketing efforts and user engagement strategies, posing significant challenges for fantasy gaming platforms during one of the most anticipated sporting events of the year.
The high tax rate imposed by the Centre has caught many gaming operators off guard, compelling them to reassess their strategies and business models.
Previously, these platforms were operating without any tax implications, but since October 2023, the sector has faced a significant financial burden.
The implementation of the 28% Goods and Services Tax (GST) translates to users needing to allocate Rs 28 for every Rs 100 spent on online games, regardless of their skill-based or chance-based nature.
28% GST On Online Gaming | Ashneer Grover Exclusive Interview
This tightened taxation policy has raised concerns among gaming companies, particularly regarding its adverse effects on their ability to invest in new game development, hindered cash flows, and constrained business expansion opportunities.
Compounded with the current IPL season, where marketing budgets are already constrained due to the tax implications, gaming companies find themselves facing additional challenges in promoting their platforms and attracting users.
In October 2023, the blanket GST tax was implemented by the Indian government to streamline taxation and bring more transparency to the booming fantasy gaming industry.
According to a report by the All India Gaming Federation, India’s online gaming market has experienced remarkable growth in recent years. It is forecasted to surge from USD 1.6 billion in 2022 to a projected USD 5 billion by 2025. This growth is attributed to the rising penetration of smartphones and the internet across the country.
While the intention behind the move may be noble, its consequences for fantasy app operators and users have yet to be fully realized. Before learning further about the implications, let’s delve into the history and origin of fantasy gaming operations.
Fantasy sports involve creating teams of real players from different sports and earning points based on their actual game performance. It started after World War II, initially focusing on golf, then expanding to football and baseball.
With digital advancements, fantasy sports have become a big industry. Applications now support multiple games, including popular franchise-based leagues like the NBA (National Basketball Association), AFL (Australian Football League), NRL (National Rugby League), and IPL (Indian Premier League). Dedicated game lobbies for these tournaments have further expanded the fantasy sports market.
As per a recent study released by Allied Market Research titled ‘Opportunity Analysis and Industry Forecast, 2021–2027,’ the worldwide fantasy sports market was valued at USD 18.6 billion in 2019 and is anticipated to attain USD 48.6 billion by 2027, showcasing a compound annual growth rate (CAGR) of 13.9% from 2021 to 2027.
Fantasy sports platforms team up with big sports leagues like the ICC Cricket World Cup, the Indian Premier League (IPL), and the Pro Kabaddi League to get more visibility and connect with a larger audience. These partnerships also boost user engagement and participation. However, during IPL 2024, fantasy gaming apps are finding it difficult to maintain their marketing and sponsorship efforts as they grapple with the burden of GST.
Indian Online Gaming Sector from the Year 2019 to 2023 With Forecasted Value for the Year 2025
Impact of the GST on Fantasy App Operators
The rate of GST tax has left fantasy app operators scrambling to assess its impact on their businesses.
The sudden increase in tax rates from zero to 28% has significantly increased their operational costs. This, in turn, may lead to a decrease in revenue and profitability for these platforms.
According to market reports, more than four months following the enforcement of a 28% GST on the sector, gaming companies have witnessed a staggering increase in operating costs, ranging from 4x to 6x. This surge in costs has significantly impacted profitability, leading to diminished or non-existent returns for many players in the industry.
As per Inc42 Weekly Brief, over 500 employees were laid off by Mobile Premier League (MPL), Hike (Rush), and Spartan Poker, with Bengaluru-based Gameskraft‘s Gamezy Fantasy, MPL-backed Striker, Fantok, and Quizzy ceasing operations.
“The new rules will increase our tax burden by as much as 350-400%. As a business, one can prepare for a 50% or even a 100% increase, but adjusting to a sudden increase of this magnitude means we need to make some very tough decisions,” the co-founders said in an email to the employees,” MPL CEO and co-founder Sai Srinivas had said in an internal email to employees.
Who Are the Key Players in the Fantasy App Business?
App Name
Ratings
Type
Big Cash
4.7 Stars
Multi-Gaming RMG
Dream 11
4.5 Stars
Fantasy Gaming
My Team 11
4.3 Stars
Fantasy Gaming
MPL
4.1 Stars
Multi-Gaming RMG
Howzat
4.4 Stars
Fantasy Cricket Gaming
Fan2Play
4.3 Stars
Fantasy Cricket Gaming
Paytm First Games
2.7 Stars
Multi-Gaming RMG
BalleBaazi
3.3 Stars
Multi-Fantasy Gaming
Vision11
2.3 Stars
Fantasy Cricket Gaming
11Wickets
4.1 Stars
Multi-Fantasy Gaming
The higher tax rate means that fantasy app operators may have to make tough decisions such as reducing marketing budgets, cutting down on user acquisition initiatives, laying off employees to streamline costs, or even increasing the fees charged to users.
All of these measures could have a negative impact on the overall user experience and may deter new users from joining these platforms.
Potential Consequences for Fantasy App Users
The retrospective GST tax has the potential to affect fantasy app users in several ways.
Firstly, the increased costs incurred by app operators may be passed on to the users, making participation in fantasy games more expensive. This could lead to a decline in user engagement, as players may be hesitant to spend more money on these platforms.
Additionally, the higher tax rate may also result in reduced prize pools and rewards for winners. Fantasy app operators, burdened by the additional tax liability, may be forced to cut back on offering attractive incentives to users
This could further dampen the enthusiasm of fantasy gaming enthusiasts and discourage them from actively participating in the games.
A media report quoted Aman Gupta, VP of Finance at Witzeal Technologies, a new-age gaming tech company, as saying, “Already, several startups in the gaming sector have ceased operations following the 28% GST adjustment. If the government’s anticipated review post-March fails to yield favorable results, I anticipate dire consequences for numerous gaming companies, including major players.”
With the Lok Sabha polls announced and the government in election mode, it’s unlikely there will be any changes to the GST rate for fantasy gaming before June.
Responses From Fantasy App Operators and Industry Experts
Fantasy app operators have expressed concerns about the GST tax and are seeking solutions. Many are disappointed with the abrupt implementation of the tax and are urging a reconsideration of the tax rate.
Industry experts have also weighed in on the matter, highlighting the need for a balanced approach that takes into account the impact on both operators and users.
With around 71 show-cause notices issued by the government and approximately Rs 1.12 lakh crore at stake, clear regulations and a unified legal approach nationwide are crucial.
Forecasts suggest that revenues from this sector are poised to reach an impressive Rs 29,000 crore.
The industry suggests that a lower tax rate or a phased implementation could help mitigate the negative consequences of the tax and ensure the continued growth of the fantasy gaming industry.
“Our legal advisors have indicated that the current environment creates uncertainties that we cannot ignore. The recent imposition of a 28% GST on the entire realized amount, coupled with high TDS and issues related to payment gateways, has further compounded these challenges. Additionally, the substantial cost of customer conversion has placed a significant strain on our resources,” a social gaming platform, FanTok said on the professional networking site LinkedIn before ceasing its operations temporarily.
Exploring Alternative Revenue Models for Fantasy Apps
To overcome the challenges posed by the retrospective GST tax, fantasy app operators are exploring alternative revenue models.
One such model is the introduction of in-app purchases or subscriptions. By offering additional features or premium content at a nominal cost, operators can generate revenue without solely relying on participation fees.
Another approach is strategic partnerships and sponsorships. Fantasy app operators can collaborate with brands and advertisers to create mutually beneficial campaigns.
This not only diversifies their revenue streams but also enhances the overall user experience by providing engaging and relevant content.
Marketing Strategy for Fantasy Apps During IPL With GST in Place
Opt-In Registration Campaigns
Launch enticing campaigns across digital channels to encourage users to subscribe for SMS and WhatsApp updates, emphasizing real-time updates and exclusive offers.
Timely Updates and Reminders
Send regular updates on IPL matches, trade deadlines, and player news directly to subscribers’ phones to keep them engaged and informed throughout the season.
Exclusive Offers and Discounts
Offer special promotions, such as discounted entry fees and referral bonuses, exclusively to subscribers to incentivize participation and foster loyalty.
Real-Time Player Insights
Deliver instant updates on player performance, injuries, and trade rumors to empower users to manage their fantasy teams effectively.
Interactive Engagement
Engage subscribers with interactive contests, polls, and surveys related to IPL matches, rewarding active participation and valuable feedback.
Responsive Customer Support
Utilize SMS and WhatsApp for quick and convenient customer support, addressing queries and resolving issues promptly to enhance user experience.
Strategic Cross-Promotions
Partner with sports brands and media outlets to amplify reach and promote the fantasy app’s subscription service, leveraging collaborative opportunities during the IPL season.
Implementing these strategies will enable fantasy apps to leverage SMS and WhatsApp marketing effectively, driving user engagement and participation despite the challenges posed by GST implementation.
The Future of Fantasy Apps in the Wake of the GST
The fate of fantasy apps in this Indian Premier League season and beyond hinges on their ability to adapt to the new tax regime.
While the initial shock of the retrospective GST tax may have caused disruptions, operators and users alike are resilient and eager to find viable solutions.
Despite the challenges, the IPL season remains an evergreen golden opportunity for fantasy app operators to attract new users and retain existing ones.
The thrill of the games and the spirit of competition continue to captivate cricket fans, making fantasy apps an enticing platform for engagement and entertainment.
Tips for Fantasy App Operators to Navigate the Changing Landscape
To navigate the changing landscape of the fantasy gaming industry, app operators need to be proactive and strategic.
Here are some tips to help them stay ahead:
Focus on User Retention
Prioritize the needs and preferences of existing users by enhancing their experience through personalized recommendations, rewards, and exclusive content.
Invest in Marketing
Despite the increased tax burden, allocate a portion of the budget to marketing efforts, targeting potential new users and expanding the user base.
Leverage Data Analytics
Utilize advanced analytics tools to gain insights into user behavior, preferences, and trends. This data can be used to refine marketing strategies and improve the overall user experience.
Strategies for Fantasy App Users to Continue Enjoying the IPL Season
For fantasy app users, the retrospective GST tax shouldn’t deter them from enjoying the IPL season and participating in their favorite games.
Here are some strategies to make the most of the season:
Plan your Budget
Set a budget for fantasy gaming and stick to it. Be mindful of the increased costs due to the tax and allocate your funds accordingly.
Explore Alternate Platforms
Consider trying out different fantasy apps to find the one that offers the best value for your money.
Take Advantage of Promotions
Keep an eye out for promotions and special offers from fantasy app operators. They may provide an opportunity to maximize your winnings and offset the increased costs.
Adapting to the New Reality of Fantasy Apps in the Post-GST Era
The retrospective 28% GST tax has undoubtedly posed challenges for fantasy app operators and users alike. However, it is crucial to adapt to the new reality and find innovative solutions to sustain the growth and popularity of fantasy gaming.
While the fate of fantasy apps in this IPL season remains uncertain, one thing is clear – the spirit of competition and the love for cricket will continue to drive users towards these platforms.
By embracing change, exploring alternative revenue models, and prioritizing user experience, fantasy app operators can weather the storm and emerge stronger than ever.
“ With Dream11 already having a big piece of the pie, smaller companies might feel the heat. This could lead to a pure monopoly as Dream11 grows even bigger, giving them more control over platform costs. If the decision to remove GST is made, Dream11 could emerge as the eventual winner,” a cricket enthusiast posted on networking site LinkedIn.
And for users, the thrill of creating virtual teams and competing against friends and fellow cricket enthusiasts will keep the excitement alive, despite the financial implications of the GST tax.
Conclusion
In conclusion, the decision by India’s GST Council to levy a 28% GST on online gaming has stirred debate and apprehension among industry professionals.
While the government’s intention to prevent gambling is understood, industry stakeholders fear catastrophic repercussions, including job losses, restrictions on foreign investment, and a potential shift towards illegal offshore platforms.
The future of the online gaming sector hangs in the balance, with the industry pleading for reconsideration of the high tax rate. Only time will reveal whether the government will heed these concerns and revisit its decision, ensuring a more balanced approach that fosters both regulatory compliance and industry growth
So, as the IPL season unfolds, let us embrace this new reality and continue to enjoy the magic of fantasy apps, creating unforgettable moments and memories that will last a lifetime.
FAQs
What are the top fantasy apps in India?
The top fantasy apps in India include Dream11, MPL (Mobile Premier League), MyTeam11, BalleBaazi, and FanFight, among others.
How popular are these fantasy apps among users?
These fantasy apps boast millions of users and have a significant presence in the Indian gaming market. Dream11, in particular, has emerged as a market leader and official partner of major sports leagues like IPL.
What types of games do these fantasy apps offer?
These apps primarily focus on cricket, but they also offer fantasy leagues for other sports such as football, basketball, kabaddi, and more. Users can create virtual teams of real players and earn points based on their performance in actual matches.
How do these apps generate revenue?
These apps generate revenue through various channels, including entry fees charged for participating in fantasy leagues, advertising, sponsorships, in-app purchases for premium features, and partnerships with sports leagues and brands.
Are these apps legal in India?
Yes, fantasy sports apps operate legally in India under the exemption provided for games of skill in state gambling laws. However, they must comply with certain regulations and guidelines set by regulatory authorities to ensure fair play and responsible gaming practices.
Amid the deluge of tax notices being slapped on companies, the GST (Goods and Services Tax) Council is receptive to complaints and is said to be providing clarifications on the same. However, the onus lies on companies to be prudent in their tax and financial compliance, said tax experts that StartupTalky spoke with.
The GST Council is an apex body appointed by the government to make recommendations and modifications pertaining to GST.
“In many cases, the GST council is proactively looking into the issues. Some of the issues are getting resolved due to clarifications issued from time to time, but not all of them. The individual taxpayer or their associations are approaching the GST council and they are trying to get a resolution,” said Sunil Gabhawala, chairman of the Indirect Tax Committee at the Institue of Chartered Accountants of India and former president of the Bombay Chartered Accountants’ Society. Gabhawala was also a member of the Study Group constituted by the Maharashtra Government for implementing GST.
The tax department has been slapping tax notices on a number of companies, catching them by surprise.
“To some extent the GST Council is receptive, they are open to hearing the representation and if they feel that there is something where they could give a clarification then they are trying. It is only that the point has to fit into the decision-making process,” Gabhawala said.
GST was implemented in 2017, replacing a multilayered tax system. The first few years of the new tax regime were marked by implementation issues. However, over the past few years, the tax department has tightened the corks and screws of the GST framework.
Recently, the tax department unveiled its GST report, which gave a sneak peek into how the new tax regime had reformed the taxation process.
“The GST was structured to be technology-driven so that there is less scope for compliance issues, tax evasion, and corruption, and to enhance the user experience for both taxpayers and tax officers,” said a report released in April by the Director General of Taxpayer Services commemorating five years of the GST regime.
A no-frills approach could make business sense at times, but when it comes to financial reporting and compliance, ‘less is never more’, according to some tax consultants.
“It’s crucial for companies to maintain accurate records, comply with GST (Goods and Service Tax) laws, and stay informed about any changes in regulations to avoid large tax liabilities and the associated penalties,” said Yogesh Singhania, Chief Business Officer of Hostbooks, which provides digital accounting services.
The need for hiring a professional in matters of taxation and finances has gained further importance as businesses, especially startups, seem unsustainable.
“You cannot always bear the flag of a ‘startup’, or a small company, when it comes to compliance. Just to save money, you cannot have a consultant who is not qualified,” said Jatin Chedda from the GST Practitioners of Maharashtra.
Notice Corner
A number of companies from various sectors have received the taxman’s notice. We enlist a few types of notices that companies have received:
Evasion
A number of companies have simply not paid up their tax liabilities. In July, Finance Minister Nirmala Seetharaman informed the Parliament that 2784 cases worth INR 14,302 crore of GST tax evasion were detected in April–May, out of which INR 5,716 crore were recovered.
Mismatches
A majority of companies that have received GST notices are where the tax authority has observed discrepancies in the taxes filed. The government had rolled out an automated scrutiny of GST returns, which led to notices being triggered wherein there were data mismatches. These mismatches pertain to different types of returns being filed i.e. monthly and annual.
Input Tax Credit
Of the many mismatches that have been found, those pertaining to taking undue advantage of the input tax credit a number of companies, especially insurance companies, availed of the input tax credit using fake invoices. These fake invoices were issued by intermediaries for services such as marketing, branding, and advertising without actually providing for the underlying service. In September 2022, the DGCI said fraudulent input tax credit to the tune of INR 824 crore had been availed of by 16 insurance companies, out of which some of them had already paid INR 217 crore.
Change of Rules
Companies have to cough up money when tax authorities change laws. The tax department and a number of gaming companies have been at loggerheads since the former tweaked its law pertaining to gaming companies. The DGCI issued a statement earlier this year stating that from October 1, GST of 28% would be levied on the full value of bets and not on the gross gaming revenue. However, a number of companies are also contesting notices wherein GST has been applied to bets placed before October 1.
Interest and Penalties
Companies such as LIC have been slapped with penalties for paying GST at lower rates. Infosys Limited has been charged a penalty and interest for non-receipt of inward remittances from export proceeds.
Conclusion
The unification of tax laws and technology has added more weapons to the taxman’s arsenal. There is no escaping their hawk-like scrutiny. With a more formal structure in place, the tax department is focusing on its core objective of vigilance. This calls for heightened self-regulation and surveillance from corporations themselves. At the same time, companies must be aware of the procedures and the corporate bodies to approach if they have been erroneously penalized. Henceforth, cutting corners may not be the brightest of ideas when it comes to hiring experts in taxation and financial matters.
The Goods and Services Tax (GST) is an extensive indirect tax structure that has revolutionised the Indian taxation domain. Moreover, the GST structure substituted and simplified a complicated web of numerous indirect taxes with a unified tax administration to facilitate the taxation procedure, making for seamless business operations.
Nevertheless, one of the substantial challenges faced by companies during the initial enactment was the difficulties associated with GST payment and return filing. Advanced technology has played an integral part in streamlining this process, making it more accurate, efficient, and suitable for taxpayers and the government.
Let’s explore how technology simplifies GST payment and return filing. Read on!
Goods and Services Tax (GST) is a government-imposed indirect tax charged on the supply of services and goods, seeking to substitute a complicated network of indirect taxes with a simplified tax structure.
Moreover, the principal purpose of GST is to reduce cascading taxes, improve tax compliance, and build a more transparent and responsible taxation routine.
However, the effective implementation of GST requires well-designed policies for tax payment and return filing. These policies are crucial to ensure that businesses can smoothly transition into the updated tax system.
Understanding the Role of Technology in Simplifying GST Payment and Return Filing
Here are some ways technology can simplify GST payment and return filing processes.
Integration and Automation
The latest technology has facilitated the automation and integration of different elements of GST payment and return filing. In addition, automated GST payment systems can compute payable taxes, prepare invoices, and populate tax returns based on business data, reducing the risk of mistakes and reducing manual intervention.
Furthermore, this technological advancement enhances transparency in the tax system by providing real-time access to transaction data for businesses and tax authorities. It promotes compliance and reduces the chances of tax evasion, ultimately contributing to a more efficient and fair tax ecosystem. Automation simplifies GST processes and strengthens the overall tax collection and reporting infrastructure.
This automation facilitates consistency and accuracy while saving time for key business operations.
Net Banking and Payment Gateways for GST
Adopting electronic payment methods like Net Banking and Payment Gateways makes paying GST and filing returns much more efficient. Businesses can easily pay their GST dues online without physically going to tax offices or banks. Moreover, these digital payment options offer a safe and convenient way to transfer money, improving the overall business experience.
Data Reporting and Analytics
Modern technology facilitates cutting-edge data analytics and reporting abilities, allowing tax officials to monitor and examine business transactions more efficiently. It promotes early examination and resolution of discrepancies and mistakes and helps stop tax evasion and forgery.
Also, data-driven insights help policymakers modify tax guidelines based on actual consumption habits.
Mobile Applications
Many tax payment websites offer mobile applications, allowing taxpayers to skim through important GST-related details, file returns, and file tax filings from anywhere.
Also, these mobile apps offer higher flexibility and convenience, empowering companies to remain compliant regardless of location.
Education and Awareness
Technology plays a vital part in educating taxpayers about GST laws and policies. Webinars, Online resources, and informative videos help companies understand their responsibilities and navigate the GST process seamlessly. This empowerment improves compliance and decreases unintentional mistakes.
GSTIN and API Integration
The Goods and Services Tax Network (GSTIN) functions as the technological foundation of the GST system. It simplifies the integration of different software applications through Application Programming Interfaces (APIs), allowing quick data flow between taxpayers, tax officials, and third-party service providers. This integration simplifies data exchange and reduces the repetition of efforts.
Advantages of Technological Integration for GST Payment
The integration of technology into GST payment and return filing procedures brings many advantages that are as follows:
Time-Saving: Automation and online websites decrease the time needed for preparing and filing GST returns, allowing companies to concentrate on core functions.
Efficiency: Streamlined processes and real-time validation improve overall efficiency, lowering the managerial burden on companies.
Accuracy: Technology-driven approaches reduce manual errors, leading to accurate reporting and decreased discrepancies.
Transparency: Latest technology ensures transparency in business operations, preventing tax evasion and facilitating a proper tax environment.
Cost Savings:Online payment modes and reduced human intervention add to cost savings for taxpayers and tax administrators.
Compliance: User-friendly interfaces and educational resources promote better knowledge and adherence to GST laws.
Conclusion
The role of technology in facilitating GST payment and return filing is paramount. From online platforms and automation to data analytics and mobile applications, the latest technology has revolutionised, how organisations interact with the tax system. And as modern technology continues to grow, GST payment and return filing processes will become even more systematic, allowing companies to navigate the taxation complexities easily.
The new 28% GST on online gaming has produced divided opinions about the industry’s future in India. Some experts condemn the GST hike, while others see it as boosting government revenues.
The Parliament’s new amendments in the Goods and Services Tax (GST) laws to levy a 28% tax on the face value of all bets made in online gaming, casinos, and horse racing destabilized the online gaming industry in the country. Further, the GST Council also agreed that there should be no distinction between a ‘game of skill and a game of chance’.
The online gaming sector, worth Rs 13,500 crore, accounted for 77% of India’s gaming sector revenue in 2022. As per the FICCI-EY report, these revenues were expected to grow to Rs 16,700 crore and Rs 23,100 crore in 2023 and 2025 respectively. Revenue Secretary Sanjay Malhotra has predicted that the new levy would fetch an estimated additional revenue of Rs 20,000 crore to the government.
However, the new GST law to levy a 28% tax on the face value of online games curtailed the growth of the industry resulting in large-scale lay-offs and cost cuts in prominent companies operating in the sector.
GST Sentimeter | GST Council Decides On 28% Tax On Online Gaming | CNBC TV18
Government’s Motive to Impose 28% GST on Online Gaming
StartupTalky spoke with several key figures in the online gaming industry regarding the government’s decision to increase the GST on Real Money Gaming (RMG). Most experts opine that this move is an effort to increase government revenue, while others think that this also carries an underlying motive of curbing the unregulated expansion of RMG in India.
Dr. Aruna Sharma, a policy advisor and practitioner development economist by profession and the former Secretary of the Ministry of Electronics and IT, Government of India, believes that the government’s decision to increase the GST on RMG is a complex one, and there are likely multiple factors at play.
“The online gaming industry is a growing sector, and it is a potential source of revenue for the government. The government’s decision to increase the GST on both games of skill and games of chance is primarily aimed at increasing government revenue. The state governments have supported this decision, as they believe that it will generate more revenue for them. The government has been facing a fiscal deficit for some time now, and it is looking for ways to raise revenue.”
Mr. Rohit Bansal, Founder, of Super 4, said, “It’s a delicate balance between revenue generation and addressing the broader societal concerns associated with RMG, highlighting the government’s efforts to strike equilibrium in a rapidly evolving industry.”
Mitesh Gangar, Co-Founder & Director, PlayerzPot commented, “A 28% GST on the entire face value of online gaming is poised to significantly impede the growth of the online gaming industry. Previously, companies were willing to take risks and invest substantial resources in their operations, but this new taxation scheme renders such endeavors unviable. It presents a series of challenges, including constraints on cash flow, which in turn limits a company’s capacity to allocate funds towards research, innovation, expansion, and even its overall survival.”
Indian Online Gaming Sector from the Year 2019 to 2023 With Forecasted Value for the Year 2025
Impact on Online Gaming Companies
The GST hike has caused serious hindrances in the revenue and workforce of several companies including unicorns. Fantasy gaming platform Mobile Premier League (MPL) has laid 350 employees so far, citing additional tax burdens. Other smaller players in the industry are dealing with layoffs, shutdowns, and funding challenges amidst the 28% GST on online gaming at full face value.
It also has undoubtedly imposed an increased financial burden on the companies. The additional tax has led to higher entry fees and reduced prize pools, making it more expensive for players to participate in fantasy leagues. This has ultimately resulted in a decline in player engagement and overall revenue for us as a brand.
When asked about the impact of the new tax on the company’s workforce, Bansal said, “To manage increased expenses resulting from higher GST rates, we have implemented cost-cutting measures. We have also made some operational adjustments, leading to shifts in workforce allocation, and job roles to optimize efficiency and reduce costs.”
Joy Bhattacharjya, Director General, Federation of India Fantasy Sports (FIFS) said that the decision would massively affect the $2.5 billion of Foreign Direct Investment (FDI) already invested and would jeopardize any further FDI in the industry.
Bhattacharjya also warned that this decision could result in users shifting towards unauthorized betting platforms, thereby posing a risk to users and causing a loss in government revenue.
Zacharias Tegefeldt, CEO and Co-founder, of TrophyRoom, while speaking about his company’s strategy to maintain a strong presence in the market and ensure positive growth, said, “Consumers will surely be pickier about where to place their funds going forward. It puts an increased emphasis on customer experience, support, etc. It also likely means that operators that do something new and different may be looked at differently. If I pay more, I want to experience more, so there’s an opportunity for companies like TrophyRoom, who focus a lot on product and gameplay innovation, to grab a larger piece of the market, by providing that extra spice to the experience. In a sense, it puts us in a rather unsuspected good position, since innovation and customer experience already make out the core pillars of our right to exist.”
However, when the 28% GST hike was announced, there were a lot of speculations about its impact on the esports industry as well. Clearing the confusion regarding whether the GST will have any sort of impact on the Esports or video gaming industry of the country, Mr. Vinod Tiwari, President, of the Esports Federation of India (ESFI) & acting Director General, of the Olympic Council of Asia states, “It is imperative to first understand that the 28% GST is going to apply to the iGaming sector, including Real Money Gaming (RMG), fantasy sports, teen patti, rummy, and poker which are categorized under gambling or betting in the rest of the world. Contrary to some media reports, this GST is neither applicable nor will it have any impact on the ‘Video Games’ or the Esports industry.”
“Esports has been officially recognized as a sport by the government which finally and thankfully distinguishes it from any activities like iGaming such as fantasy, teen patti, rummy, poker, betting, and gambling, among others. It will carry on being taxed the way it always has been. Theories of ‘game of skill’ and ‘game of chance’ which only exist in our country neither apply nor are relevant in the Esports ecosystem,” says Mr. Tiwari.
In April of this year, the government made amendments to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 to lay out a comprehensive framework for the Online Gaming Ecosystem. According to Tiwari, instead of using the umbrella term of “online gaming”, the GST council should have ideally used the more specific term “iGaming’ which is known worldwide, or even “online real money game” which is defined in “The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules to avoid the confusion.
“We must acknowledge the TRUTH that the primary objective of the 400 million Indian video gamers (and approximately 3 billion gamers worldwide) is ‘purely entertainment’, and not financial gains or making money. It is regrettable that in India, our video games or esports industry is often unjustifiably associated with ‘iGaming, betting, RMG, gambling, and many more, which creates unnecessary confusion and misperceptions,” he adds.
Additionally, it is crucial to highlight that video game publishers have strict policies against implementing entry fees for any Esports events organized using their video games, further separating it from iGaming.
Gangar, when asked about the impact of the new GST on the willingness of aspiring entrepreneurs to enter this industry, said, “Aspiring entrepreneurs eyeing the online gaming sector will now think twice before venturing into it, primarily due to the burdensome GST. Consequently, the burgeoning gaming economy will face a substantial setback, resulting in economic strain, diminished job opportunities, and a stifled growth trajectory within the industry.”
Finance Minister Nirmala Sitharaman has targeted October 1 to roll out the tax along with an assured review of the levy six months after its implementation.
Tegefeldt said, “I hope for an amendment that addresses these quite serious issues. There needs to be a balance, which I don’t think has been achieved yet. If this needed amendment happens, I think it’s likely that the industry will see a rather quick dip, a new low, and then a resumption of growth after a while. If not, there are several different outcomes.”
On the other hand, being optimistic about growth in the industry, Bansal believes that trends like mobile gaming, localized content, and innovative gameplay are likely to drive expansion. He also shared that government regulations and consumer protection measures might become more stringent which in turn would affect the dynamics of the market. Collaboration between industry stakeholders and regulatory bodies will be pivotal for sustainable growth.
“Overall, the industry’s future will depend on its ability to adapt to changing tax structures, navigate regulatory hurdles, and meet evolving consumer preferences,” Bansal added.
However, Dr Sharma thinks that the Indian gaming industry has a huge potential to thrive, and the new regulation would foster a suitable environment for its development.
She said, “The government’s decision to increase the GST on online gaming is not intended to discourage the development of the gaming industry in India. The government believes that the Indian gaming industry has the potential to become a major hub, and it has already taken steps to regulate the industry and create a favorable environment for its growth. The increase in GST is simply a way for the government to raise revenue, and it is not expected to have a significant impact on the industry.”
Tegefeldt, anticipating the future, said, “A brighter future, from where I’m sitting, is indeed one where the hungry underdogs that actually bring something new and fresh to the table, get increased attention from the players. It would be an incredibly cool thing if the faster, leaner, and more creative underdogs can put some pressure on the larger operators and lead the way to a more fun future in gaming.”
While it is still one month away from the implementation of the Act, it is too early to predict the outlook for the online gaming industry or iGaming in India. The RMG industry in India faces a mixed outlook due to the change in tax regulations. While increased taxation may present challenges for operators, the industry is expected to continue its growth trajectory as online gaming gains popularity.
Nitin Konde
