New GST on Betting - Paying on Full Face Value or Profit?

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The Goods and Services Tax (GST) Council, in its 50th meeting held on July 11, 2023, has decided to impose a 28% GST on online gaming, casinos and horse racing. The decision was taken after a long debate, with some members of the council arguing that online gaming is a form of gambling and should be taxed at a higher rate. Others argued that online gaming is a skill-based activity and should be taxed at a lower rate.

In the end, the council decided to impose a uniform 28% GST on all forms of online gaming, casinos and horse racing. This means that players will now have to pay an additional 28% tax on the amount they spend on these activities.

In which value will the GST be applicable?

The GST will be applicable on the full face value of the bets placed on online gaming, casinos and horse racing. This means that the tax will be levied on the entire amount that the player wagers, not just on the amount that they win or lose.

For example, if a player places a bet of Rs.100 on an online game, they will have to pay Rs.28 GST. This is regardless of whether they win or lose the bet.

What are the implications of this decision?

The decision to impose a 28% GST on online gaming, casinos and horse racing is likely to have a significant impact on these industries. It is expected to lead to higher prices for players, which could discourage participation. It could also lead to some players moving to offshore gaming sites that are not subject to Indian taxes.

The decision could also have an impact on the investment climate for the online gaming industry in India. It is likely to make it more difficult for startups and small businesses to raise capital, as investors may be concerned about the high tax burden.

The government has argued that the GST will help to raise revenue and curb gambling addiction. However, it is unclear whether the tax will actually achieve these objectives. It is possible that the tax will simply drive players to offshore gaming sites, where they will be able to gamble without paying any taxes.

Only time will tell what the long-term impact of this decision will be. However, it is clear that it is a significant development for the online gaming industry in India.

What are the concerns of the industry?

The online gaming industry has expressed concerns about the 28% GST. They argue that the tax is too high and will make it difficult for them to compete with offshore gaming sites. They also argue that the tax will discourage investment in the industry and lead to job losses.

The industry has urged the government to reconsider the decision and to lower the GST rate. They have also suggested that the tax should be levied only on winnings, not on the entire amount that players wager.

What is the government's response?

The government has defended the 28% GST, arguing that it is necessary to raise revenue and curb gambling addiction. They have also said that the tax will only apply to online gaming platforms that are registered in India.

The government has also said that they are open to discussing the issue with the industry and that they are willing to consider lowering the GST rate if the industry can provide evidence that it is too high.

The way forward

It remains to be seen how the online gaming industry will respond to the 28% GST. It is possible that the industry will challenge the decision in court. It is also possible that the industry will simply accept the tax and pass it on to players.

Only time will tell how the 28% GST will impact the online gaming industry in India. However, it is clear that it is a significant development that will have a major impact on the industry.

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