Lok Sabha Passes Amendments To GST Bills To Tax Online Gaming At 28%

The Lok Sabha passed amendments to two Goods and Services Tax bills on Friday to levy a 28% tax on online gaming, horse racing, and casinos starting Oct. 1.

The Central Goods and Services Tax (Amendment) Bill, 2023, and the Integrated Goods and Services Tax (Amendment) Bill, 2023, were introduced by Finance Minister Nirmala Sitharaman.

The amendments distinguish between online gaming and online money games, empower the government to block offshore suppliers who do not register, and specify that gaming operators and managing platforms would qualify as "suppliers".

"The proposed amendments make a pragmatic distinction between online gaming and online money gaming, specifying that the  latter is online gaming in which the player pays with an expectation of winning," Abhishek Rastogi, founder of Rastogi Chambers, said. This distinction might create certain classification issues, but it was a very bold and wise decision, he said.

In its 50th meeting on July 11, the GST Council recommended that the actionable claims supplied in casinos, horse racing, and online gaming might be taxed at the rate of 28% on full face value, irrespective of whether the activities are a game of skill or chance.

Subsequently, it was recommended that the law be amended to reflect the changes and provide clarity on the matter.

In its 51st meeting on Aug. 2, the Council recommended that the form of valuation for the tax levy be based on the amount paid by the player at the entry point, excluding the winnings from previous games, and not on the total value of each bet placed.

The proposed amendments ensure there is a clear distinction between online gaming and online money gaming, specifying that online money gaming is online gaming in which the player pays or deposits an amount with the expectation of winning some amount or reward in a game or event.

The amendment also specifies the definition of "supplier" to include those individuals or entities operating and managing digital or electronic platforms that offer online gaming, mandating their registration and GST payments.

The rules also stipulate mandatory registration for a person supplying online gambling from a place outside India to a person in India.

Through the amendments to the IGST Bill, the department would be empowered to enforce a tax liability on overseas suppliers of online money gaming and have the power to block websites/platforms of non-compliant suppliers who evade registration.

This provision is expected to treat domestic and offshore suppliers with parity and prevent the migration of players.

"The other proposal to tax overseas suppliers of online money gaming and block websites/platforms of non-compliant suppliers is yet another bold step, which will plug tax leakages and incentivise the service providers to operate locally," Rastogi said.

According to an official with knowledge of the matter, the amendment to the IGST Act, 2017, also empowered the government to notify intangible goods (in this case, actionable claims) in the case of import and collect due IGST as regular interstate supply under the provisions of the IGST Act.

The official, who spoke to BQ Prime on the condition of anonymity, said the proposed amendments seek to establish a robust legal framework to avoid legal ambiguities and also address various stakeholders concerns.

This decision would aid in combating money laundering, illegal income, black money, and other illegal activities associated with online gaming, the official quoted above said. It will also help in identifying and penalising those who evade taxes or indulge in fraudulent practises, according to the official.