Madhya Pradesh Poised to Become Fifth Indian State to Revise GST Rates on Online Gaming

Madhya Pradesh stands on the threshold of integrating changes to its GST legislation to levy 28% GST on initial player deposits spanning online gaming, casinos, and horse racing. This decision is in line with the central government’s recent amendment of the CGST Rules 2017 by enforcing and notifying the Central Goods and Services Tax (Third Amendment) Rules, 2023.

According to media reports, the state government has been preparing to approve an ordinance updating the GST rules on online gaming. This ordinance was to be presented at a cabinet meeting planned for September 16, which was to be chaired by Chief Minister Shivraj Singh Chouhan.

We have no official confirmation that the meeting took place and the approval granted. Still, given that the state is geared up to undertake the necessary amendments to the Madhya Pradesh Goods and Services Act, 2017, it is clear that following Haryana, Arunachal Pradesh, Goa, and Gujarat, Madhya Pradesh is a step away from becoming the fifth Indian state to introduce the necessary amendments in its GST rules.

Divergent State Reactions to the GST Council’s Decision

The resolution to apply a 28% GST on initial deposits across online gaming, casinos, and horse racing emerged as an almost unanimous decision during the 51st GST Council meeting. The sole dissenting voices came from the state ministers of Goa, Sikkim, and Delhi.

After the Union Government officially notified the rules, thus enforcing Central Goods and Services Tax (Third Amendment) Rules, 2023, the states began to follow suit to bring the new rules into force. While most Indian states have abided by the GST Council’s decision, few, like Karnataka, have been delayed in the process due to rumoured internal conflicts.

Haryana was the first Indian state to follow suit. The Haryana Goods and Services Tax (Amendment) Bill, 2023, was introduced in the Haryana Legislative Assembly on August 28 and subsequently passed.

On September 6, the Arunachal Pradesh assembly approved amendments to the APGST Act 2017, making it one of the pioneering states to adopt changes in line with the new tax regime for real-money gaming.

Significantly, Karnataka had also introduced a similar bill in their state legislative assembly. However, owing to differing viewpoints, the proposal has been temporarily shelved and will be brought up in the forthcoming meeting.

On September 8, the Goa cabinet approved the state’s GST ordinance for incorporating necessary amendments into the Goa Goods and Services Tax Act, 2017. Section 2 of the Act was revised to encompass the definition of online gaming and bring the state GST legislation in line with the GST Council`s diktat.

On September 13, the Gujarat assembly unanimously approved the Gujarat Goods and Services Tax Amendment Bill. State Finance Minister Kanubhai Desai, who introduced the bill, said the updated GST policy aims to protect the younger generation from the adverse impacts of online gaming, representing a significant stride in regulating the sector within India. However, the state opposition holds a contrasting view, expressing concerns that the new policy might foster online gambling.

After the GST Council made its final recommendations, the Parliament approved the same, followed by approval from President Droupadi Murmu.

The clock is ticking, as the notified CGST (Amendment) Bill, 2023, and IGST (Amendment) Bill, 2023 are tentatively scheduled to come into effect from October 1.

It’s crucial to underline that the 28% GST will exclusively apply to circumstances involving betting on gaming websites. The tax will not extend to casual gaming services provided by these platforms.

Though Finance Minister Nirmala Sitharaman reassured industry stakeholders that the GST Council will revisit the new GST rules six months post-implementation, the industry has reacted sharply.

Major gaming operators like the Mobile Premier League, Hike and Spartan Poker have undertaken significant staff layoffs. A few online gaming firms, including Fantok and Quizy, have temporarily suspended their operations, anticipating sharp tax escalations under the new GST regime.

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