Indirect Tax Alert

The GST Council, in its 50th Council meeting held on 11 July 2023 had inter alia deliberated on the Report of Group of Ministers on Casinos, Race Courses and Online Gaming and recommended that actionable claims supplied in Casinos, Horse racing and Online Gaming may be taxed @ 28% on full face value (irrespective whether the activity is a game of skill or game of chance).
Pursuant to the above, the GST Council, in its 51st meeting held on 2 August 2023 has inter alia recommended the following amendments to the Central Goods and Services Tax Act, 2017 (CGST Act) and Integrated Goods and Services Tax Act, 2017 (IGST Act):

  • Entry 6 of Schedule III to the CGST Act to be amended to clarify the taxation of ‘Online Gaming’, ‘Casinos’ and ‘Horse Racing’.

  • In respect of the supply of online money gaming by a supplier located outside India to a person in India, the supplier would be liable to discharge GST by obtaining a single registration in India through a simplified registration scheme. Further, the IGST Act would be amended to block access by the public to any information generated, transmitted, received or hosted in any computer resource used for the supply of online money gaming by such supplier in case of failure to comply with provisions of registration and payment of tax.

  • Valuation of supply of online gaming and actionable claims in casinos to be done at entry level only i.e., based on the amount paid or payable to or deposited with the supplier, by or on behalf of the player (excluding the amount entered into games/ bets out of winnings of previous games/ bets) and not on the total value of each bet placed. Suitable amendments to be made in the Central Goods and Services Tax Rules, 2017/ GST notifications. The amendments to the CGST Act would also include definitions of various terms.

  • The aforesaid amendments are proposed to be made effective at the earliest, preferably by 1 October 2023. It was mentioned in the press conference that the amendments would be reviewed after a period of six months after implementing the same.

BDO In India Comments

Despite various representations by the online gaming industry, there was no rollback of the decisions made in the previous GST Council meeting and today’s announcements were only to give effect to the decisions already made in the previous meeting of the GST Council. A positive clarification for the industry was issued, clarifying that the tax would be applicable only on the amount deposited with the supplier (e.g. online gaming platform or the Casino) and not on the individual bets. Now the industry would await the exact wordings of the amendments for its implementation. For determination of the liability for the past periods, the decision of the Supreme Court in the case of Gameskraft would be awaited by the industry as well as the tax authorities.

[Source: Press Release dated 2 August 2023 and statements made in the press conference by the Hon’ble FM and the officials. The exact language and effective date of the proposed amendments would be known from the amendment act/ notification, as and when issued and made effective]