New Delhi: In a decision marked by division, the Goods and Services Tax (GST) Council has opted to amend both central and state laws, effective October 1, to ensure a 28% GST on the entire value of deposits made by participants engaging in online game betting, casino activities, and horse racing. However, any winnings subsequently reinvested will be excluded from this indirect taxation.
Finance Minister Nirmala Sitharaman disclosed that this new framework will undergo review after six months of implementation. Nonetheless, winnings will continue to attract income tax as per existing regulations. Additionally, the GST Council has decided to revise the Integrated GST Act, which pertains to the importation of goods and services. This revision will necessitate offshore gaming platforms that allow Indian consumers to register and pay GST. Platforms failing to adhere to this requirement will face blocking.
Expectedly, the central government will introduce amendments to the CGST Act during the current session of Parliament. While these proposed changes provide clarity on the taxation of online gaming, casinos, and horse racing, the final decision on tax liabilities under current law will rest with the Supreme Court. In this context, the central government has submitted a special leave petition to the Supreme Court challenging a Karnataka High Court order that favoured Gameskraft Technologies Pvt. Ltd.
During a briefing, Sitharaman highlighted that while the governments of Goa and Delhi sought a reevaluation of the 28% tax on the complete betting amount in these sectors, other states such as West Bengal, Karnataka, Bihar, Uttar Pradesh, Himachal Pradesh, Maharashtra, and Gujarat endorsed an expedited implementation of the 28% tax, as previously decided.
Revenue Secretary Sanjay Malhotra clarified that the forthcoming review by the council will encompass the decisions made in this recent meeting. This review process will not necessitate further amendments to the law; any required changes, whether concerning valuation or tax rate, can be introduced via notifications or rule modifications.
Experts interpreted the GST Council’s meeting as a relief for the real-money gaming industry in India. Although the 28% rate will impact the margins of even major real-money gaming operators, they should be able to adapt and potentially flourish over time. Sudipta Bhattacharjee, a partner at Khaitan & Co., stated that the new tax rate should allow the sector to endure and possibly thrive.
Abhishek Jain, Head (Indirect Tax) and Partner at KPMG, noted that the alignment of significant provisions for the valuation of supply in casinos and online money gaming, coupled with the absence of repetitive GST on each placed bet, offers relief to the sector. Furthermore, the proposed measures for offshore gaming companies aim to level the playing field for Indian enterprises.
As per the finance minister’s statement, the 28% GST on online gaming will be levied on the initial amount paid for the game and will not encompass the total value of individual bets.
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