GST Council Stands Firm: 28% Tax Applied to Online Gaming. On August 2, the GST Council demonstrated slight flexibility on technicalities and kept the possibility of future review open. However, it maintained its unwavering commitment to impose a 28% tax on the total bet amounts for online gaming, casinos, and horse racing. The council aims to initiate this taxation from October 1st.
Nirmala Sitharaman, Finance Minister’s Statement On 28% Tax Applied to Online Gaming
During the Council meeting, Finance Minister Nirmala Sitharaman, who chaired the meeting, announced some exciting news. The government has decided to amend the Goods and Services Tax (GST) law during the current parliamentary session. This amendment will improve tax collection despite opposition from Sikkim and Goa regarding the taxation of casino users. Tamil Nadu Finance Minister Thangam Thennarasu expressed concerns, but Sitharaman assured him that the new regulations would consider the impact of the levy on the nationwide ban on online gambling.It’s commendable to see the government actively improving the tax system to ensure fairness for everyone. These rules will specifically prohibit imposing taxes in regions where there is a ban.
In a recent virtual meeting, the Delhi government advocated for reevaluating the online gaming sector. Most states decided to uphold the Council’s previous decision, which was reached after three years of discussion. The Finance Minister conveyed this outcome and despite concerns from the online gaming industry, there was a positive response to an important clarification about valuation rules for the 28% levy approved by the Council. This clarification specified that the tax would only apply to the entry fee and not subsequent winnings.
The E Gaming Federation and Federation of Indian Fantasy Sports approved this clarification, citing its resolution of potential issues with repeated taxation. They recognized that the revised tax framework could lead to a significant 350% increase in GST but also presented an opportunity for gaming companies to innovate and revitalize the foundation of the Indian gaming sector. Additionally, in response to appeals from Goa and Sikkim – who requested special consideration due to their smaller size – the Council agreed to reassess the implementation of the 28% levy on casino bets after six months. This decision followed discussions about whether the levy should be based on gross gaming revenue or the entire face value.
Sanjay Malhotra – Revenue Secretary’s Take On This
Sanjay Malhotra, the Revenue Secretary, stated that the review will mainly focus on valuation and tax rates. He mentioned that these aspects can be adjusted through notifications and rules, while broader amendments to the GST law will introduce comprehensive “enabling provisions.”
Apart from amending the central GST law, individual states will need to make changes to their respective GST laws to implement the new tax. Finance Minister Ms. Sitharaman hopes to implement it by October 1. The forthcoming changes will not have retrospective implications, but Mr. Malhotra emphasized that they are clarifications. This approach is taken because betting, gambling, and lottery are already categorized as actionable activities under the GST law.
The Revenue Department argues that online gaming, horse racing, and casinos also fit the idea of betting. However, the High Court of Karnataka rejected this interpretation and dismissed a ₹21,000 crore tax claim against Gameskraft Technologies. The Revenue Secretary mentioned filing a special leave petition in this matter, emphasizing that the Supreme Court’s final decision will take precedence.