28% GST on online game to be effective from Oct 1: FM

Finance Minister Nirmala Sitharaman on Wednesday said 28% GST on online gaming will be effective from October 1 as by that time all the states are expected to amend the state laws subsequent to the amendments to the Central GST Act enabling the higher tax bracket. Sitharaman said the Centre plans to move the amendments on taxing online gaming at 28% in the ongoing session of the parliament.

Briefing the media on the decision taken by the GST Council, the finance minister gave much-needed clarification on the process of valuation for the purpose of tax.

"The Council recommended that the valuation of supply of online gaming and actionable claims in casinos may be done based on the amount paid or payable or payable to or deposited with the supplier by or on behalf of the players excluding the amount entered into the games bets out of the winning of previous games and bets and not on total value of each bets placed," the minister said. She added that only the value at the entry will be considered for tax and not the gains accrued in each bet or games.

This is an important clarification for the online gaming sector which had come down heavily on the Council's July 11 decision of imposing 28% tax on the full value in case of the online games. The online gaming industry had been up in arms against the decisions claiming this will be tantamount to double taxation and will impact the growing sector.

"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," said the finance ministry is a release.

"As expected, the government has cleared their intention not to budge from the decisions taken towards online gaming and casinos in the 50th Council meeting. The clarifications provided by the finance minister with respect to valuation and taxable amount are aligned to make taxation of these activities simple and not to leave any scope for dual interpretation," said Ankur Gupta, Leader (Indirect Tax) SW India.  

Sudipta Bhattacharjee, (partner), Khaitan & Co. said, "Clarification from the GST Council that 28% GST will be applicable on the actual cash/equivalent deposits made by players on an online gaming platform to commence gameplay, and not on the winning amounts being redeployed by players for further gameplays, this will certainly afford some amount of relief to the online real money gaming sector, many smaller start-ups in this segment may still get very badly hit."

"The Council's decision to levy GST on deposits made at entry level has brought a sigh of relief for the sector. The council has recommended parity in treatment for casinos and online games of skill. With the said amendment, the valuation mechanism for Casino and Online gaming are kept at par i.e., GST will be charged only on the value of coins purchased and money deposited in wallet respectively, rather than levying GST on each game played. This is a welcome clarification for the industry stakeholders," said L Badri Narayanan, executive partner, Lakshmikumaran & Sridharan Attorneys.  

Meanwhile, The Federation of Indian Fantasy Sports and E-Gaming Federation said in a joint statement, "The new tax framework, while clarifying and resolving uncertainty, will lead to a very burdensome 350% increase in GST and set the Indian online gaming industry back several years. However, it will allow gaming companies a fighting chance to innovate and rebuild the foundation of gaming in India."