Goa & Sikkim Demanded 28% on GTR and Not on FaceValue - What Does This Mean
The 50th GST Council meeting was held in July 2023, and the minutes from the meeting have been released. The minutes show that all states supported taxing online gaming on the full face value of the bet. There is no distinction between games of skill and games of chance.
Altogether, this means that online gamers in India will now have to pay GST on the entire amount of money they bet, regardless of whether the game is considered to be a game of skill or a game of chance. Recently, the GST Council on Wednesday stated that India will further charge a 28% goods and services tax (GST) on the full face value of wagers made on online games, including those played on foreign platforms, as well as at casinos and at horse races. This decision will take effect on October 1.
The idea to impose the GST was made despite requests by online gaming companies for a relief. The industry had argued that the tax would be too high and would suffocate growth. However, the government said that the GST was necessary to bring online gaming into the formal economy and to collect revenue.
Under the new tax regime, only the actual cash or equivalent deposits made by players will be taxed. This is in response to concerns raised by the industry that the tax would be applied to winnings as well, which would have resulted in double taxation.
The GST Council also decided to make registration in India mandatory for offshore gaming companies. This means that any company that wants to offer online gaming services to Indian players will need to register with the Indian government. Companies that fail to comply with this requirement could face action, including being blocked under the Information Technology Act.
Goa & Sikkim’s Take on the Announcement
The only two states opposing this view were Goa and Sikkim, which have a large casino industry. These states argued that taxing online gaming on the full face value would be unfair to casinos, as they already pay GST on their Gross Gaming Revenue (GGR). The GST Council is still considering the issue of concessions for casinos, and a final decision is expected to be made in the next few months.
In addition to the issue of taxation, the GST Council also discussed the social and moral implications of online gaming. Some members of the Council expressed concern that online gaming could lead to gambling addiction and other social problems. However, the Council ultimately decided that it was not within their responsibility to regulate online gaming on moral grounds.
Key Points of the Announcement
- The full face value of wagers made on online games, including those played on foreign platforms, as well as at casinos and at horse races, will be subject to a 28% GST in India.
- The move was made despite entreaties by online gaming companies for a reprieve.
- The GST will come into effect on October 1.
- Only the actual cash or equivalent deposits made by players will be taxed.
- Overseas gaming companies will need to register in India.
- Companies that fail to abide by the new regulations could face action.
- The impact of the GST on the online gaming industry is still unclear.
However, it is likely that the tax will lead to higher prices for players and could choke growth in the industry. How the sector will adjust to the new tax system is yet to be seen.