28% GST On Online Gaming To be Effective From October, Says Nirmala Sitharaman The Centre will bring amendments to the Central GST law in the ongoing monsoon session of Parliament, following which states will pass the amendments to State GST law in their respective assemblies
By Teena Jose
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Finance Minister Nirmala Sitharaman on Wednesday said 28% GST on online gaming will be effective from October 1. As per the minister, it will be levied at face value of entry level bets placed in gaming platforms and casinos, even though three states -- Delhi, Goa and Sikkim -- expressed dissent.
The Centre will bring amendments to the Central GST law in the ongoing monsoon session of Parliament, following which states will pass the amendments to State GST law in their respective assemblies.
The minister also said that the decision will be reviewed after 6 months of its implementation or April 2024 by the GST Council to see if any change in rule is required.
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 in a statement.
The statement also added that offshore gaming platforms will have to register with GST authorities and pay taxes, failing which the government will invoke provisions of the Information Technology Act and block those sites.
Giving an example, the minister said if a bet is placed for say INR 1,000, and the player wins INR 300, then if the player again places a bet of INR 1,300, then GST will not be levied on the winning amount.
So Goods and Services Tax (GST) will be levied at the entry level in case of online gaming and casinos.
Commenting on this development, Rohit Bansal, Founder, Super4, has said that, "he recent announcement by the GST Council, imposing a dual tax structure on the online gaming industry, is a potentially detrimental decision that could have dire consequences for the smaller players within this sector. While the intention behind this move might be rooted in boosting tax revenues and bringing about industry regulation. For the smaller online gaming enterprises, the weight of this dual taxation could prove to be insurmountable. These businesses typically operate on slimmer profit margins and possess fewer resources when compared to their larger counterparts. The cumulative effect of these taxes could severely curtail their ability to maintain operations, invest in technological advancements, and provide enticing incentives to attract gamers."
He further added, "It is imperative that the GST Council reevaluates this decision and supports a more equitable approach that acknowledges the unique challenges faced by smaller industry players. Perhaps exploring a progressive tax structure or extending tax incentives to startups could serve to foster growth and innovation within the sector. The far-reaching implications of the recent dual tax imposition by the GST Council on the online gaming industry cannot be underestimated. This decision has the potential to reshape the landscape, particularly for smaller players, impacting their viability and stifling innovation."
Soham Thacker Founder CEO Gamerji also shared his viewpoint on this matter. According to him, "This was an expected move as Gvt feels it to be a necessary step for collecting. However, as an industry it is expected to affect online gaming both RMG and non RMG on their userbase revenues and overall gaming experience. Online gaming is still in a nascent industry but in the last 5 years it has attracted billions of dollars in investment. The fact that entities located outside India and are providing online gaming services will also fall under gst is likely to affect the investors sentiment and future fund raising efforts. While we are going to obey the law of the land, we feel that focusing on entering new international markets will serve as a good strategy to manage the impact of the GST levy."
