In its 50th meeting, the Goods and Services Tax (GST) Council made significant decisions regarding taxation rates for various sectors. The council decided to impose a uniform 28% tax on the full face value for online gaming, casinos, and horse racing.
Uniform Tax Rate on Online Gaming, Casinos, Horse Racing:
The Finance Minister, Nirmala Sitharaman, clarified that the aim was not to eliminate any industry but to consider the moral question of taxing them at the same rate as essential items. The tax will be levied on the full value of bets or consideration paid, rather than the gross gaming revenue or platform fee. This decision aims to create parity between online gaming companies and traditional gaming companies.
Alignment with MeitY:
Sitharaman emphasized the need to simplify the system and align with the regulations of the Ministry of Electronics and Information Technology. The tax on online gaming companies will be imposed without differentiation based on skill or chance-based games. The GST law will be amended to adjust the definition of actionable claim and include online gaming and horse racing, making them taxable at 28% of the full face value.
Mixed Reactions to the Decision:
The imposition of GST on online gaming has generated mixed reactions. Supporters argue that it will level the playing field between online and traditional gaming companies. Critics contend that it will increase the cost for consumers and hinder the growth of the online gaming industry in India.
Shilpy Chaturvedi from Deloitte India anticipates significant business impact on the online gaming sector due to the increased tax rate. She told Business Today: “Online gaming industry has been waiting for the final recommendation of the GST Council with respect to tax rate and valuation, with a bated breath. Finally, GST Council has proposed to increase the tax rate to 28% rate and that to on the entry amount particularly for real money games. It will be interesting to see the business impact for the online gaming sector considering that this sector has been touted to have significant growth potential."
Kishore Kumar, Lead, Indirect Tax, Taxmann said, "India's gaming industry which has witnessed a remarkable growth in recent times and is growing at a CAGR of 28-30% is saddled with the decision taken in the 50th GST Council Meeting with regard to its taxability. The GST council has proposed to levy GST @ 28% on the full value of gaming at par with levy on lottery and horse racing. India is probably the only Country to levy GST on full face value on all categories of online games. The blanket proposal to levy GST on full face value on online gaming will possibly put an end to the sub-judice debate of ‘game of skill’ vs ‘game of chance. This change will bring game of skill at par with wagering contracts which are in the nature of gambling and betting."