GST GoM on Online Gaming, Casinos & Horse Racing Likely to Recommend 18% GST For Games of Skill & 28% GST on Games of Chance

The Group of Ministers (GoM) set up to ascertain GST on online gaming, casinos, and horse racing has shifted its earlier stance. According to reports, it is likely to propose an 18% GST on games of skill and 28% GST on games of chance in the upcoming GST Council meeting.

The GoM had earlier proposed a uniform 28% GST for both games of skill and chance. The latest updates indicate that the GoM will likely stick with an 18% tax on Gross Gaming Revenue (GGR), keeping the current indirect tax regime unchanged for the sector. The change in stance is chiefly attributed to the Union government’s amended Finance Act 2023 that gave due recognition to the online gaming industry, separating it from gambling and betting activities.

Another major game changer was the Union Ministry of Electronics and Information Technology (MeitY) notifying the IT Intermediary Amendment Rules, 2023, last week, providing a guiding framework for regulating the online gaming industry.

The final decision on the matter will be taken in the 50th GST Council meeting, tentatively scheduled for May-end or June.

According to a source quoted by ET Now, “There have been significant developments since the report was submitted, so there will be a relook at the recommendation.”

All online games, which do not involve betting, are currently taxed at 18% GST on GRR. Last December, the GoM, in its recommendations to the GST Council, called for levying 28% GST on GGR, irrespective of whether it was a game of chance or skill.

Now that the government has finally acknowledged online gaming as a fast-growing sector holding immense potential, industry stakeholders are optimistic that the GoM recommendations will fall in line and modify its earlier submissions at the upcoming GST Council meeting.

Roland Landers, CEO of All India Gaming Federation (AIGF), said – “In light of the new MeitY (Ministry of Electronics and Information Technology) rules for online games and the developments in the context of TDS being in support of the industry, we are hopeful for similar clarity in the context of GST as well.”

Even though the GoM may recommend an 18% GST on GRR on skill games, the group is likely to club betting, casinos, and horse racing as games of chance and recommend a 28% GST on these activities. The GoM may also call for more consultation with the industry stakeholders and GST officials.

What Has Changed & Why

The Group of Ministers (GoM) on online gaming, casinos, and horse racing submitted its recommendations to Union Finance Minister Nirmala Sitharaman on December 15. Still, the report could not be discussed in the 48th GST Council meeting on December 17, 2022, or the 49th GST Council meeting on February 18.

The GoM had, in November 2022, agreed to recommend a uniform GST rate of 28% for all three sub-sectors, proposing an effective 10% increase from the current 18% charged on platform commission by rummy, poker, and fantasy sports operators.

While the GoM had initially recommended that the GST be levied on Gross Gaming Value (GGV), which is effectively the contest entry amount on online gaming, the group was unable to arrive at a final decision on this matter and passed the buck to the GST Council to make the final decision.

If GST is levied on GGV, online gaming operators will have to bear an impractical, nearly 1,100% rise in tax, and gamers will have to dish out close to 300% of their winnings in tax.

Much to the relief of the gaming industry and players, the newly introduced Finance Bill gave prominence to the online gaming industry, separating it from gambling and betting. Simultaneously, it clarified taxation on winnings, imposing a 30% TDS on net winnings from online games. The new rules came into effect on April 1, 2023.

According to industry insiders, in light of the new rules, the GoM will likely change its recommendations to attune the same with the fast-changing legal outlook on the online gaming sector.

This is a developing story. Keep following PokerGuru for more updates!