CBIC Chairman Vivek Johri Reiterates Online Gaming Companies Should Pay 28% GST on Total Prize Pool

After the recent update on the 49th GST Council meeting being postponed to the end of February, the Central Board of Indirect Taxes and Customs (CBIC) Chairman Vivek Johri told CNBC TV18 that all online gaming companies characterized as offering gambling or betting services are liable to pay 28% GST on the full value of the bets.

“We have taken this stand in ongoing cases also, and we will have to wait to see how (GST) council decides on the matter,” said Johri.

While Johri underlined that the GST Council will make the final decision on the issue, his comments hold significant importance as they give insight into the department’s perspective ahead of the crucial 49th GST Council meeting, which is likely to decide on the long-pending issue of indirect taxes to be applied on online games, casinos, and horse racing.

In a press briefing after the 48th GST Council meeting in December, the CBIC Chairman had said that online games where the outcome of winning is determined by chance would be subjected to 28% GST on the total bet amount.

The 2023-24 Union Budget proposed several changes in the income tax laws – introducing two new sections to tax winnings from gaming and gambling activities, particularly online games. Finance Minister Nirmala Sitharaman introduced taxability on net winnings from these activities at the time of withdrawals and at the end of the financial year. The lower limit on taxability was removed, meaning that all net winnings from online gaming, no matter how small, will be subjected to 30% tax deductions from the new financial year.

The gaming industry is hoping for the government to clear up the ambiguity on indirect taxation to create a clearer understanding for all parties involved.

The 48th GST Council meeting concluded with no discussions on the taxation of online gaming, casinos, and horse racing, as the matter was not taken up. Following the meeting, Revenue Secretary Sanjay Malhotra stated that the Group of Ministers’s (GoM) report on the subject had only been submitted two days prior and had yet to be circulated to council members.

The GoM, led by Meghalaya Chief Minister Conrad Sangma, was tasked with assessing the taxation for online gaming, casinos, and horse racing. After over a year of deliberations, the group proposed a 28% GST rate for all three sub-sectors, a 10% increase from the current 18% charged on platform fees or commissions by rummy, poker, and fantasy sports platforms. Casinos currently pay 28% GST on their commission.

While the GoM reached a consensus on the 28% GST rate, the ministers had differing opinions on how to apply the tax. Some favored basing it solely on the fees/commission charged by the gaming platforms, while others believed it should be calculated on the entire prize pool collected in games and tournaments.

The industry stakeholders now await a final decision on this issue in the 49th GST Council meeting, which could very well decide the fate of the burgeoning industry.

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