India: Parliament passes 28% GST on online gaming, casinos, and horse racing

The Indian Parliament on Friday approved the legislative changes required to implement the Goods and Services Tax (GST) Council's decision for 28% tax to be collected on the full value of deposits made by players to online gaming platforms, horse racing clubs, and casinos from October 1st.

The approval comes a month after the decision was passed by the GST Council, and was announced at the 50th Council meeting by Union Finance Minister Nirmala Sitharaman. 

Madhyam, an active observer of parliamentary proceedings, noted that the bills were passed in the Lok Sabha (lower house) within three minutes without any discussion, after which it was passed to the Rajya Sabha (upper house), where the bills were returned within four minutes without any discussion or suggestion. 

The Lok Sabha and the Rajya Sabha approved the Central Goods and Services Tax (Amendment) Bill, 2023, and the Integrated Goods and Services Tax (Amendment) Amendment Bill, 2023, which will be brought into effect in October. 

The 28% GST, in the case of online gaming, applies only where wagering is involved and not to any services provided by those hosting casual games. As of now, online betting and gambling are taxed at 28% GST, while other games are taxed at 18% of gross gaming revenue. 

VIDEO | Union Finance minister Nirmala Sitharaman addresses media after 51st GST Council Meeting. pic.twitter.com/xg9b3R2Vst

— Press Trust of India (@PTI_News) August 2, 2023

Earlier in July, Union Finance Minister Nirmala Sitharaman announced the hike in taxes for online gaming, horse racing, and casinos, after several deliberations with the GST Council.

Speaking at a press conference earlier this month, Sitharaman noted that the GST Council would come back with a position review after six months from October 1, 2023. This means that from October 1st, all states will have to clear changes to state GST laws in this regard, regardless of their views on the tax.

👉 Recommendations of 50th meeting of GST Council

👉 GST Council recommends Casino, Horse Racing and Online gaming to be taxed at the uniform rate of 28% on full face value

👉 GST Council recommends notification of GST Appellate Tribunal by the Centre with effect from… pic.twitter.com/9LMcvJDYpe

— Ministry of Finance (@FinMinIndia) July 11, 2023

New GST does not affect gaming in which no real money is involved

Business publication Livemint cited a government source who explained that the amendments do not affect tax on casual online gaming in which no real money or betting or wager is involved. 

The publication noted that a simplified, but mandatory GST registration for overseas platforms offering online money gaming services to Indian consumers and a special provision bringing tax liability on such platforms are part of the amendments. Additionally, non-compliant offshore gaming platforms or websites will be blocked.

Rajat Mohan, senior partner at accounting firm AMRG & Associates said: "With these amendments, online gaming companies shall not expect any litigation in respect of the charge of GST prospectively. However, litigation for the old period would continue. These regulations clarified that international online gaming corporations would be treated at par with Indian counterparts and need registration in India for payment of GST.”

The government source reiterated that the decision to levy a 28% tax on what is called, in legal parlance, 'actionable claims' or a chance to win in casinos, horse racing, and online gaming, irrespective of whether these are games of skill or chance was taken after elaborate deliberations for about three years.

The person said that there is no effect of the amendments on the start-up ecosystem in India, as it brings equality between international entities and domestic ones. The report noted that the payments made for such activities in crypto assets will be taxable. For activities in which players pay or deposit money or money's worth including virtual digital assets (VDAs) in the expectation of winning money or money's worth including VDAs, will be covered under the definition of online money gaming.