GST Council Keeps 28% Tax on Online Gaming, To Be Effective From Oct 1, Review After 6 Months

GST Council Meeting on Online Gaming: The 51st GST Council, chaired by Union Finance Minister Nirmala Sitharaman, on Wednesday decided to keep the 28 per cent tax on online gaming, casino and horse racing, and discussed the modalities to implement it. Addressing media after the Council meeting, Sitharaman said the 28 per cent GST on online gaming is expected to be implemented from October 1 and will be reviewed after 6 months of its implementation.

In the press conference, the finance minister said the decision to impose the 28 per cent tax was taken after three long years of discussions. She said the GST Council discussed the language of amendments that will be needed to enable taxing online gaming.

She said the 28 per cent tax would be on the initial amount paid on the game and not on the total value of each bet placed. GST would not be applicable on the winnings which could be used to place further bets.

Sitharaman said Delhi, Goa and Sikkim wanted a review of the tax proposal on online gaming. Tamil Nadu also had apprehensions, as such games are banned there. She said Maharashtra, Gujarat, Chhattisgarh, West Bengal and Bihar, among others, are in favour of the 28 per cent tax and want implementation as soon as possible.

The finance minister said the value of the supply of online gaming and actionable claim in casinos will be on entry-level. She pointed out that the GST Council discussed that if 28 per cent is taxed on gross gaming revenue (GGR), the net revenue will be only 11-12 per cent.

The finance minister said the current 18 per cent GGR results in a net 8-9 per cent in terms of revenue.

On the latest decision, Federation of Indian Fantasy Sports (FIFS) and E-Gaming Federation (EGF) in a statement said, “FIFS and EGF, which represent 50 Indian online gaming companies, appreciate the government addressing the industry’s concerns on the issue of repeat taxation. The new tax framework, while clarifying and resolving uncertainty, will lead to a very burdensome 350 per cent increase in GST and set the Indian online gaming industry back several years. However, it will allow gaming companies a fighting chance to innovate and rebuild the foundation of gaming in India.”

The Council in its 50th meeting last month approved levying a 28 per cent tax on the full face value of bets in online gaming, casinos and horse racing. It was vehemently opposed by the gaming industry, with the All India Gaming Federation (AIGF) terming the decision as “unconstitutional, irrational, and egregious”.

The latest meeting, held within less than a month of the previous GST Council meeting on July 11, discussed the modalities for determining supply value in online gaming and casinos for levying a 28 per cent tax.

51st GST Council’s Key Recommendations

• The Council recommends certain amendments in the CGST Act 2017 and IGST Act 2017, including amendment in Schedule III of CGST Act, 2017, to provide clarity on the taxation of supplies in casinos, horse racing and online gaming.
• It recommends to insert a specific provision in IGST Act, 2017, to provide for liability to pay GST on the supply of online money gaming by a supplier located outside India to a person in India.
• It also recommends that the valuation of supply of online gaming and actionable claims in casinos may be done based on the amount paid or payable to or deposited with the supplier, by or on behalf of the player (excluding the amount entered into games/ bets out of winnings of previous games/ bets) and not on the total value of each bet placed.
• The Council suggests that CGST Rules, 2017, may be amended to insert specific provisions for valuation of supply of online gaming and supply of actionable claims in casino accordingly.
• The Council decides that effort will be made to complete the process of making amendments in the Act at the earliest and bring the amendments into effect from October 1, 2023.

The Council’s meeting, conducted via videoconferencing on Wednesday, August 2, was attended by Union Minister of State for Finance Pankaj Chaudhary, besides finance ministers of states and UTs (with legislature) and senior officials from Union government and states.