51st GST Council Meet: Online Gaming To Be Taxed 28% On Deposits And Other Key Decisions
The decision will be enforced from Oct. 1 and will be reviewed after six months of its implementation.
The 51st GST Council has recommended that a 28% tax be levied on face value for online games, horse racing, and actionable claims in casinos at the entry level, while noting that a few states expressed their reservations against the decision.
In a move that will bring parity to the three gaming events and avoid repetitive taxation, total deposits submitted by the player to the supplier at the entry point will be the method of valuation for tax levy in the case of online gaming, rather than the total value of each bet placed.
"...the valuation amount for tax will be based on the amount paid/payable to/deposited with the supplier by or on behalf of the player ... excluding the winnings of previously played games," Union Finance Minister Nirmala Sitharaman said in a media briefing on Wednesday after the virtual meeting.
A lack of consensus also prevailed on the decision, with a few states, namely Delhi, Goa, Sikkim, and Tamil Nadu, expressing specific reservations.
According to Sitharaman, Minister Atishi from Delhi is said to have asked for the decision to be reviewed and sent back to the Group of Ministers. Goa and Sikkim also felt the decision taken last time would hurt them and proposed that the mechanism of levy should be considered on gross gaming revenue.
The state of Tamil Nadu, represented by the newly appointed Finance Minister Thangam Thennarasu, expressed apprehension that the levy of taxes would nullify the statewide ban on online gaming.
Revenue Secretary Sanjay Malhotra, who was also present at the briefing, said that an additional provision in the language of the decision may be allowed so that already enacted state laws will be unaffected.
The minister added that the clarifications and amendments will be enforced as of Oct. 1 and be reviewed once more after six months of their implementation.
"The Council’s decision to levy GST on deposits made at entry level has brought a sigh of relief for the sector ... with the said amendment, the valuation mechanism for casino and online gaming is kept at par, i.e., GST will be charged only on the value of coins purchased and money deposited in wallets, respectively, rather than levying GST on each game played. This is a welcome clarification for industry stakeholders.L Badri Narayanan, Executive Partner, Lakshmikumaran & Sridharan Attorneys
Offshore Suppliers Mandated To Register
In response to the possibility of players shifting offshore gaming platform entities, the department has mandated that offshore entities have GST registrations.
A failure in registration could result in the platform being blocked, in accordance with the provisions of the Information Technology Act.
The Council also recommended to insert a specific provision in IGST Act, 2017, to provide for liability to pay GST on the supply of online money gaming by a supplier located outside India to a person in India, for single registration in India for the said supplier through a simplified registration scheme and also for blocking of access by the public to any information generated, transmitted, received or hosted in any computer resource used for supply of online money gaming by such supplier in case of failure to comply with provisions of registration and payment of tax.Government press release
Amendments And Clarifications
The Council recommended certain amendments in the CGST Act, 2017, and IGST Act, 2017, including an amendment in Schedule III, entry 6 of the CGST Law where 'online money gaming', 'casinos, and 'horse racing' would be cited as actionable claims that attract tax levy.
The amendments also seek to define online gaming (which includes online money gaming) and make no distinction between games of skill and games of chance, as agreed upon in the 50th GST Council meeting.
"The Council recommended that the CGST Rules, 2017, may be amended to insert specific provisions for the valuation of the supply of online gaming and the supply of actionable claims in casinos accordingly," a release on the subject said.
The Council suggested including the definition of virtual digital assets in the CGST law. Therefore, if virtual digital assets are used as payment consideration for purchasing online games, they will attract GST, and their definition will be the same as the income tax law.
Rules for determining the place of supply for online gaming will be separately clarified, Revenue Secretary Malhotra said while clarifying BQ Prime's query.
Additionally, if an individual chooses to withdraw the deposit amount (on which tax has already been paid) at any point, no refund can be availed of on the GST that has already been paid.
Wednesday's GST Council meeting comes less than a month after the 50th meeting on July 11, where a uniform 28% GST was decided to be levied on the full face value of casinos, horse racing, and online gaming. The decision was met with strong apprehension regarding the viability and survival of the Indian online gaming industry.
