India: GST Council keeps 28% levy on online gaming, casinos, horse racing

Wednesday August 2, after the 51st meeting of the GST Council, Union Finance Minister Nirmala Sitharaman said: “The GST Council recommended that valuation of supply of online gaming and actionable claims in casinos may be done based on the amount paid or payable to or deposited with the supplier, by or on behalf of the player (excluding the amount entered into games or bets out of winnings of previous games or bets) and not on the total value of each bet placed.” 

With three states — Delhi, Sikkim and Goa — also raising concerns about the tax on the full amount, it was also decided that it would be reviewed after a period of six months from implementation, she said. 

“The decision to amend the CGST had dissenting voices,” Sitharaman said. While Delhi sought a review of the entire decision, particularly relating to online gaming, Sikkim and Goa, which have interests in casinos, wanted the 28% GST to be levied on the gross gaming revenue. Meanwhile, Tamil Nadu, which has banned online gaming, has sought the amendment to clarify that the GST would not be levied in the state. 

Sitharaman, however, said that most states were in favour of implementing the GST on 28% at the earliest and it was decided that they would try to pass the amendment to their GST Acts in their ongoing assembly sessions or would issue an Ordinance to the effect. The Centre is likely to table the amendment to the Central GST Act in the current Monsoon Session of Parliament. 

The amendment would also distinguish between online gaming and online money gaming and GST would be levied on the latter. 

For offshore gaming companies, 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.  

“We will introduce a specific provision in the law for registration for offshore entities. We are saying that incase any of the laws on offshore gaming companies are not followed, then we can use IT Act to get the sites blocked,” Revenue Secretary Sanjay Malhotra explained. 

A special monitoring cell under the Directorate General of GST Intelligence will be set up to monitor offshore gaming companies and ensure they pay tax. 

Payment through virtual digital assets for these will also be considered for the purpose of levying GST. 

The GST Council, chaired by Sitharaman, had in its previous meeting on July 11, had decided to levy a 28% GST on online gaming, horse racing and casinos on the full value.

For this, Section 3 of the GST Act needs to be amended to bring online gaming and horse racing as taxable actionable claims.   

Industry players, which had been concerned about the decision, however, welcomed the clarification on the tax.