 "Centre likely to seek different taxation policy for games of skill, chance")
In a shift in policy, the Centre has decided to advocate for a different taxation policy for online gaming, with "games of chance" (gambling) being subject to a higher rate of goods and services tax (GST) than "games of skill", a report by the Financial Express (FE) said.
All online games should not be regarded as games of chance or betting or gambling, an official source told FE, adding that there must be a distinction made between games of skill and games of chance.
All online games should not be regarded as games of chance or betting or gambling, an official source told FE, adding that there must be a distinction made between games of skill and games of chance.
He further said the finance ministry would present its view when the GST Council discusses the report of a Group of Ministers (GoM) on online gaming, horse racing and casinos.
Although the final decision will be made by the Council, which includes both the Centre and states, the ministry may suggest the highest GST rate of 28 per cent for online games, where the winning is contingent on a specific outcome or is in the nature of betting or gambling.
For games of skill, a lower rate, say 18 per cent, may also be recommended.
The GoM had proposed a 28 per cent tax rate for casinos, race courses and online gaming. Currently, an 18 per cent GST is levied on online gaming on the platform fees.
In recent months, the GST authorities have gone after the online gaming industry, where it has found massive tax evasion. In September 2022, the Karnataka High Court stayed a notice seeking GST payment of Rs 21,000 crore on gaming firm Gameskraft Technologies.
The online gaming industry has also asked the income tax department to review the new TDS provisions.
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The GoM, chaired by Meghalaya chief minister Conrad Sangma, delivered its report to the Union finance minister Nirmala Sitharaman in December last year. While it had proposed a 28 per cent tax on online gaming, there was no clear agreement on whether the tax should be levied on only the portal fees or the entire consideration, including the bet amount. It later decided to refer all future decisions to the GST Council.
Another source said the GoM is unlikely to meet to review its report and that all views will now be presented to the GST Council when it takes up the report.
The date for the next Council meeting has not yet been set, but it is expected to take place in June, said the source.
With officials cracking down on firms for tax evasion, the industry has been waiting for a clarification on the GST on online gaming.
Tax officials are also optimistic that the recently announced amendments to the IT rules, 2021, will aid in better monitoring of online gaming firms. Online gaming intermediaries involved in games with real money would also be required to obtain users' KYC details.