Valuation rules for GST on e-gaming platforms effective prospectively

e-gaming platforms: Nirmala Sitharaman, the minister of finance, stated that the valuation guidelines imposing a 28% GST on small wagers placed on internet gaming sites are applicable going forward.

“The clarification on that (online gaming) was issued. 28 per cent is the tax and as to who it will apply to and on whom the incidence will fall is clearly explained… The valuation rules to exclude winnings is prospective. So, I hope there is not confusion on that,” Sitharaman said in the Lok Sabha.

The minister was responding to a debate in the House regarding the GST (Second Amendment) Bill, which sets a maximum age limit for GSTAT members and the president.

This suggests that, starting on October 1, wagers made using winnings from online gaming portals will not be subject to the 28% Goods and Services Tax (GST).

Read also: After online gaming firms, GST authorities set sights on casinos

The GST Council made it clear at its August meeting that online gaming is subject to 28% GST. After that, in August, Parliament approved changes to the Central GST Act that implemented the Council’s decision. The amendments went into effect on October 1st.

The changes stipulate that GST will be applied to first-time wagers placed on internet gaming platforms rather than to the money that players spend from their winnings after each game.

Using Rs 1,000 as an example, the minister stated that if a player wins Rs 300 from a wager and then places another wager of Rs 1,300, GST will not be applied to the winnings.

A number of internet gaming companies received notices from GST field officers in September alleging that they had failed to pay taxes totaling more than Rs 1.12 lakh crore.

Such companies have approached the court and the matter is sub judice.

Read also:  Online money gaming companies exploring various ways to offset impact of 28% GST

To a question in the Rajya Sabha on the amount of tax evasion and number of showcause notices issued to online gaming companies, Minister of State for Finance Pankaj Chaudhary had said on December 5, “71 show cause notices involving GST to the tune of Rs 1,12,332cr have been issued to online gaming companies during financial years 2022-23 and 2023- 24 (up to October 2023).”

“As these notices are pending adjudication, the respective GST demand is not yet determined under the provisions of CGST Act, 2017,” he said.

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