Poker Bonuses and Loyalty Rewards - How GST Will be Applicable

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A significant decision for the casinos, horse racing firms, and internet gaming industry was made at the 50th GST Council meeting on July 11, 2023. The GST Council, with the assistance of the Group of Ministers, issued recommendations regarding the application of GST to online gaming and put an end to the controversy surrounding "games of skill or chance." Online gaming, casinos, and horse racing will be subject to a 28% GST on the entire face value. The GST law needs to be changed in order to encompass this inside its purview.

In addition, a GST of 28% was suggested in the GoM's (Group of Ministers) final report on the value of all consideration received in online gambling, including the admission fee. Additionally, it had been suggested that after a 28% GST had been applied to the initial purchase of casino chips, there would be no more GST costs, even for fresh bets placed with money won from prior rounds.

In the sections that follow, we go into further detail on how the GST is currently applied to online gambling and casinos and examine the potential effects of the suggested adjustments.

July 28, 2023

The 51st GST Council meeting will be held by video conference on Wednesday, August 2, 2023, according to a tweet from the GST Council's official account. The guidelines for implementing the 28% GST duty on casinos, racetracks, and online gaming are anticipated to be discussed and approved by the Council.

Online skill games, casinos, and online lotteries are currently taxable under the GST

Let's first examine how online gambling and casinos are currently treated by the GST in order to better comprehend the implications of the proposed amendments.

Online gaming and the GST

Online games are currently differentiated under the GST regime based on skill versus chance. The 50th GST Council meeting's recommendation will result in a 28% GST charge on the full face value. Additionally, the GST law will soon be changed to include online gaming under its purview since it now falls under actionable claims.

A game of skill is one in which the result is determined by the player's skill, practice, and experience rather than just by chance. Rummy and fantasy sports games like Dream 11 are a couple of examples. This distinction is crucial since skill games are eligible for a reduced tax rate.

whereas betting, gambling, and horse racing are all viewed similarly to games of chance. They are consequently charged a higher GST rate under Rule 31A of the CGST Rules, 2018.

However, there is a problem since, as the recent Gameskraft Technology case demonstrates, sometimes it is difficult to distinguish between talent and chance. In order to entice a higher GST tax rate, the tax authorities combined all of its games, including rummy, into games of chance.

Tax on Lotteries

Online lotteries are subject to the same GST rate as games of chance, which is 28%.

More information on the GST's applicability to online lotteries is available here.

GST Rates for Casinos and Online Gaming

The following GST rates are now applied to winnings from online casinos and gaming:

  • Under HSN 998439, an 18% GST is only applicable to the platform's commission or service fee or to gross gaming revenue (total stake value minus dispersed winnings) for games of skill like esports, puzzles, and some card games.
  • A 28% GST on the whole bet value is due under HSN 999692 for games of chance, including casino gaming.

Online gambling, casinos, and horse racing would all be subject to a 28% GST on the entire face value after the 50th GST Council meeting on July 11, 2023. Since the GST law needs to be amended, the update has not yet been announced.

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