BENGALURU: The decision to impose a 28 per cent tax on the full-face value of bets placed on online gaming will be implemented from 1 October after required changes are made in the Central and state laws, said Finance Minister Nirmala Sitharaman after the 51st GST Council meeting held in New Delhi.
The GST Council will review the implementation of 28% GST on online gaming, and casinos after six months. The FM said that other states; from Karnataka to Gujarat, Maharashtra and Uttar Pradesh wanted the decision taken at the last meeting to be implemented. Delhi had opposed the levy of the tax on online gaming while Goa and Sikkim wanted the levy on gross gaming revenue (GGR) and not on face value, added the FM.
The GST Council - the highest decision-making body of the new indirect tax regime comprising the Union FM and representatives of all states had discussed the language of amendments that will be needed to enable taxing online gaming, Sitharaman said after the meeting. She added that the council “recommended that valuation of supply on online gaming & actionable claims in casinos may be done based on the amount paid or payable or payable to or deposited with the supplier by/or on behalf of the player, excluding the amount entered into the games, bets out of winnings of previous games and not on the total value of each bet placed...”
The All India Gaming Federation (AIGF) has reacted to the Council decision and said, that it will “severely impact the online gaming sector and result in a situation where a majority of players, including the MSMEs will no longer be able to survive in the face of the increased tax liability of 400%,” said the Federation.
“Only established and well-entrenched skill gaming companies may be able to scrape through this change by using their existing capital reserves to counter the effects of substantially increased tax liability. However, even their revenues and valuations will significantly fall. Additionally, companies at their early growth stages, particularly those within the startup and the MSME sector will be disproportionately impacted,” cautioned the AIGF, while adding that “the rampant illegal offshore gambling websites will thrive as efforts to block them has been ineffective till now.”
“As the oldest and largest apex industry association for online gaming, and the voice of MSME gaming startups, we sincerely hope that as mentioned in the meeting, there will be a rethink after six months and a stable and progressive regime can be proposed, which will help the industry grow, provide safe platforms to digital nagriks, while increasing tax revenues and contributing to the vision of India becoming a global gaming powerhouse,” stated the AIGF.
Meanwhile, L Badri Narayanan, executive partner, Lakshmikumaran & Sridharan Attorneys welcomed the GST Council decision.
“The Council’s decision to levy GST on deposits made at entry level has brought a sigh of relief for the sector. The council has recommended parity in treatment for casinos and online games of skill. With the said amendment, the valuation mechanism for Casino and Online gaming are kept at par i.e., GST will be charged only on the value of coins purchased and money deposited in the wallet respectively, rather than levying GST on each game played. This is a welcome clarification for the industry stakeholders,” he said.
Narayanan added that the decision is “in alignment with the recent developments in income tax provisions linked to the deposit of an amount to the wallet. Bank-to-bank transfer of money will create ease of transparency, traceability and monitoring for stakeholders. We need to await the fine print of amendments in relation to definition, place of supply, offshore gaming etc.”