GST Council Meeting: On 2nd Aug over issue of online gaming

GST Council Meeting

GST Council Meeting: On July 11, the GST Council had decided to levy a uniform 28 per cent tax on full face value for online gaming, casinos and horse racing. The government was expected to bring in a legal amendment to facilitate this in the monsoon session of Parliament to enable inclusion of online gaming and horse racing under actionable claim and hence, facilitate taxation of these categories with no distinction for game of skill or chance.

While the government has maintained that this decision is not intended to harm any industry, online gaming companies have raised concerns about the impact of this move on the industry, as it is likely to affect volumes and thus the viability of gaming companies.

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A single, uniform tax rate of 28% will be applied to the face value of the chips bought in casinos, the whole value of bets placed with bookmakers or totalizers in horse racing, and the full value of bets placed in internet gaming, as recommended by GST Council Meeting. Prior to now, the ministerial panel on online gambling, casinos, and horse racing had debated the second option of levying tax on gross gaming revenue or platform fee, that is, the fee paid to utilize the gaming services, but it did not find favor.

On August 2, the Goods and Services Tax (GST) Council will convene by video-conference to make a final decision about the levy of a 28 percent GST on online gaming, casinos, and horse racing. Officials insisted that there is no retreat from the idea. The details regarding the required legal amendment and tweaks in rules will be put up before the Council at the meeting.

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Despite the official’s insistence that the rate remains the same, the Council is anticipated to decide at its meeting whether the 28% GST fee should be applied to entry values or to every bet.

The source further stated that the legal modification will include detailed information regarding the rate and the mechanism of the face value on which the 28% GST rate would be applied to online gambling, casinos, and horse racing.

Leading domestic and international investors including Tiger Global, Peak XV (previously Sequoia Capital India), and Steadview Capital sent a letter to the Prime Minister earlier this month requesting a reassessment of the 28% GST on online gambling. According to them, the decision will negatively affect $4 billion worth of potential investments in the industry.

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Before that, earlier in July, more than a hundred industry associations representing top gaming companies in the country including Dream 11 and Mobile Premier League issued an open letter to the government on the tax decision, saying that it has left the industry in “significant distress” and could have “devastating implications” for the companies, including a shut down of businesses.

According to Revenue Secretary Sanjay Malhotra, the online gaming business now pays only 2% of its anticipated annual revenue in taxes, and by implementing a standard GST rate of 28% for this industry, the government could generate ten times more revenue. The government received roughly Rs 300 billion from casinos, Rs 1,700 billion from online gaming, and Rs 80 billion from horse racing in FY23.

People are worried after the 28% GST on online games as announced in GST council meeting.

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