Parliament passes GST amendment bills defining online money gaming, use of crypto assets

The Parliament today passed the Central Goods and Services Tax (Amendment) Bill, 2023 incorporating the definition of 'online money gaming' making the activity a specified actionable claim liable to tax and also bringing into the fold virtual digital assets – cryptocurrency – under the ambit of the law so that crypto transactions are not used as tax evasion tools.

The Integrated Goods and Services Tax (Amendment) Bill, 2023 too was passed by the Parliament today. The amendments provide for the imposition of GST on online money gaming by offshore entities, which would now need GST registration in India.

Amendments to both the Acts pave way for imposing 28% GST on the online gaming industry. The bills, which are both money bills, were first passed by the Lok Sabha and sent to the Rajya Sabha, which returned the legislations to the lower house after a voice vote without any discussion.  

The amendment to CGST Act, 2017 defines online gaming as, “offering of a game on the internet or an electronic network and includes online money gaming”.   

"Online money gaming means online gaming in which players pay or deposit money or money's worth, including virtual digital assets, in the expectation of winning money or money's worth, including virtual digital assets, in any event including game, scheme, competition or any other activity or process, whether or not its outcome or performance is based on skill, chance or both," said the clause defining online money gaming and use of cryptocurrency in online gaming.  

The amendments define "specified actionable claim" as the actionable claim involved in or by way of betting, casinos, gambling, horse racing, lottery or online money gaming.

The amendments also defined the "supplier" in the gaming ecosystem and clarified that "virtual digital asset" will have the same meaning as assigned in the Income-Tax Act, 1961.

"A definition of online money gaming has been introduced and the activity itself has now been inserted as a “specified actionable claim” liable to tax in Schedule 3. The coverage to include virtual digital assets ensures that any form of consideration (real, crypto, digital) will now be covered under the ambit of tax, and transactions in cryptocurrency etc. cannot be a loophole to escape GST," said Rajat Bose, Partner, Shardul Amarchand Mangaldas & Co.

"The provision to tax offshore online gaming companies through a simplified registration in India, and the stringent provisions to curb tax evasion by such players shows the seriousness of the government to enforce the regulation and collect the intended revenue from the industry," Bose added.

Experts also believe the amendments will put a lid on the future litigations and help eliminate uncertainty and ambiguity.

"With these amendments, online gaming companies shall not expect any litigation in respect of the charge of GST prospectively. However, litigation for the old period would continue. These regulations made it clear that foreign online gaming companies would receive the same treatment as their Indian counterparts and would need to register in India in order to pay GST," said Rajat Mohan, Senior Partner, AMRG & associates.

"The amendments essentially empower levy of GST on gaming portals involving monetary deposits (including virtual digital assets). The said amendments shall be a segue for notifying the rules of implementation including valuation aspects, and will give a definite line of sight for the booming gaming industry. However, the debate as to whether the mere recharge of payment wallets implies a 'supply' would still continue. Moreover, by defining what constitutes online gaming, who is liable to pay GST, and how GST is to be calculated, the amendments would help to eliminate uncertainty and ambiguity," said Saurabh Agarwal, Tax Partner, EY India.

State legislatures will now have to make enabling provisions in state GST laws and ratify the same. This process, the centre expects, will be complete in two months and 28% GST on online gaming will be levied with effect from October 1 this year.