Online gaming likely to attract 28% GST on full value

A group of ministers (GoM) on casinos, race courses and online gaming decided not to change its earlier recommendation for a uniform 28% tax on the full value of the consideration on all the three. This paves the way for the GST Council to go for a 28% tax on online gaming on the full value, including prize money, both for skilled and unskilled games. Currently, an 18% tax is levied on the platform fee.

“All the states have reiterated their earlier stance (28% tax on full value) and the view will be communicated to the GST Council in the form of a report for a decision on the matter,” West Bengal Finance Minister Chandrima Bhattacharya, who attended the meeting told.

In the GST Council meeting on June 29, Union finance minister Nirmala Sitharaman, who is the chair of the federal body, gave 15 more days to the GoM to relook at the taxation issues after the Goa government flagged some concerns about Casinos. However, the GoM could not arrive at any further decision due to divergent opinions.

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In the GST Council meeting on June 29, Union finance minister Nirmala Sitharaman, who is the chair of the federal body, gave 15 more days to the GoM to relook into the taxation issues after the Goa government flagged some concerns about casinos. However, the GoM could not arrive at any further decision due to divergent opinions.

The GoM, in its first report in June, had recommended that in the case of online gaming, the activities should be taxed at 28% on the full value of the consideration, by whatever name such consideration may be called, including contest entry fee, paid by the player for participation in such games.

Since GST is levied on online skill-based gaming at 18% currently on the platform fee (up to 20% of the contest entry fee), the tax incidence on the gaming industry will rise if the proposal is implemented.

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In the case of racecourses, the GoM had earlier said that GST should continue to be levied at the rate of 28% on the full value of bets pooled in the totalisator and placed with the bookmakers. In the case of casinos, GST should be applied at the rate of 28% on the full face value of the chips/coins purchased from the casino by a player, it said. In the case of casinos, once GST is levied on the purchase of chips/coins (on face value), no further GST to apply to the value of bets placed in each round of betting, including those played with winnings of previous rounds, the GoM had said in the first report.

In its last meeting in September, the GoM decided to seek legal opinion on whether the prize money in online gaming and horse racing is covered within “actionable claim”.

In the same meeting, West Bengal and Uttar Pradesh reiterated their stand that GST on online gaming, horse racing and casinos should be at a uniform rate of 28% on the full value of the consideration without making a distinction between games of skill or chance.

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On the question of whether horse racing, casinos and online gaming are activities of games of skill or chance, the general view of the Central government officials is that this should not be relevant for GST regime like in the virtual digital assets (VDAs) for income tax. In the FY23 Budget, the Centre imposed a 30% income tax on gains from VDA transactions even though the debate is still going on whether to ban these private virtual currencies/assets or regulate them.

Analysts said the GST Council might categorise actionable claim as ‘services’ by putting it under Section 7 of the CGST Act for taxation purposes without getting into the debate of games of skill or chance.