28% GST on online gaming to be implemented from October 1: FM Sitharaman

Softening its stance, the Goods and Services Tax (GST) Council on Wednesday decided to implement a 28 per cent tax on electronic gaming, casinos, and horse racing, but this would be applied on the initial amount paid upon entry, and not on the total value of each bet placed.
 

Despite dissent from a few states, including Goa, Sikkim, and Delhi, the Council proceeded with the decision without a vote, as the majority of states were in agreement.
 

The proposed amendments are likely to be introduced from October 1, with a comprehensive review to be conducted six months after implementation, Union Finance Minister Nirmala Sitharaman said at a media briefing following the Council meeting.
 

Sitharaman noted that the provision to enforce the higher taxation on online gaming would likely be considered in the ongoing session of Parliament. After the necessary modifications to the central and state laws, the new tax is expected to come into effect from October 1.
 

The decision follows a previous Council meeting on July 11, where it was decided that a uniform 28 per cent tax would be imposed on the total value of money paid by users to online games, making no distinction between games of skill and chance. 

As part of the new online gaming rules, the Council approved a new definition of 'online money gaming', which would include games based on both skill and chance. Online gaming is defined as “an offering of a game on the internet or an electronic network, and includes online money gaming”.

Furthermore, ‘online money gaming’ is expected to mean “games where players pay or deposit money or money's worth, including virtual digital assets, in the expectation of winning money”.

A new provision for defining “virtual digital asset”, interpreted similarly to the Income Tax Act, will be inserted, Revenue Secretary Sanjay Malhotra said.

Additionally, to tackle offshore online gaming firms, a new provision is expected to be included for online money gaming supplied by people located outside the taxable territory. Such people would be included within the ambit of Integrated Goods and Services Tax (IGST).

Concerning valuations, the Council recommended that the valuation of supply on online gaming and actionable claims in casinos should be based on the amount paid, payable to, or deposited with the supplier by or on behalf of the player. This excludes the amount used in the games, bets made from previous game winnings, and not on the total value of each bet placed.

The Council did not arrive at a unanimous decision on the matter, with some states seeking further examination. Delhi proposed that online gaming should be referred back to the Group of Ministers (GoM) for a thorough evaluation. Both Goa and Sikkim expressed concerns and suggested levying tax on gross gaming revenue, citing potential adverse impacts. Tamil Nadu sought clarity on the tax levied in cases where states have banned online gaming.

The Council also considered the opinions of Maharashtra, Gujarat, Chhattisgarh, West Bengal, Karnataka, and Himachal Pradesh, all of which were in favour of implementing the proposed GST without delay. Some states are even contemplating an ordinance to expedite the process.

Sitharaman acknowledged the appeals from a few states and assured an evaluation of the matter. She said the decision to levy the 28 per cent tax on casinos and online gaming was taken based on collective wisdom. She indicated that the value of supply of online gaming and actionable claim in casinos will be on the entry level, noting that if 28 per cent is taxed on Gross Gaming Revenue (GGR), the net revenue will be only 11-12 per cent. She pointed out that the current 18 per cent GGR results in net 8-9 per cent revenue.