52nd GST Council Meeting on October 7 on Online Gaming, Casinos and Horse Racing

[Update]: The GST Council shared a post on X (formerly Twitter) in which wrote “The 52nd meeting of the GST Council will be held on 7th October 2023 at Vigyan Bhawan, New Delhi.” The Union Finance Minister Nirmala Sitharaman will chair the meeting.

This meeting will be held two months after the 51st GST Council meeting was held on August 2. In the previous meeting, the council approved the amendments related to GST laws on the taxation of casinos, horse racing and online gaming. Also, the 28% GST is levied on the entry-level amount and not on every bet placed. The tax rate will be implemented on online gaming from October 1, 2023, hopefully. The council will review the tax rule that it is implemented properly or not.

In the 52nd meeting, the council can discuss the previous decisions and the status of the decision. Also, the council can reduce the GST rates on millet products to 0% category. Although the exact agenda is yet to be announced.

All About 51st GST Council Meeting, August 2nd, 2023

In a 51st GST Council meeting held on August 2nd, 2023 some new changes were made for online gaming, casino and horse racing businesses. On July 11th, when the 50th meeting was held this crucial decision was made for the Assessment of Tax liabilities under GST on online gaming, casino and horse racing businesses.

On the basis of a report submitted by the Group of Ministers to the GST Council, the imposition of GST debate ends over the question of whether these activities are considered a game of skill or chance. But now different changes are introduced. Below is a list of all the new changes with previous rules.

Key Aspects of GST Council Meeting

In the 51st GST Council Meeting, the Finance Ministry brought Some Important Changes in the Online Gaming, Casino and Horse Racing Industry. The changes are as follows:

• The 28% tax rate will be applicable on the actual cash or equivalent deposits made by players on an online gaming platform and not on the winning amounts being redeployed by players.
• GST will be charged only on the value of coins purchased and money deposited in wallets, respectively, rather than levying GST on each game played.
• Valuation of supply of online gaming and actionable claims in casinos may be done based on the amount paid or payable to or depositors with the supplier by or on behalf of the player. Excluding the amount entered into games, bets for winnings of previous games and bets and not on the total value of each bet placed.
• If you are arranging a platform where actionable claims can be and online games can be played and actionable claims can be made then you are also within the purview of the definition of suppliers liable to pay the GST.
• The council will review the matter and the implementation of the 28% tax at the deposit value on full face value. Impact of higher GST will be reviewed after six months.

Council Review Decision After Six Months

GST Council will review 28% levy on online gaming after 6 months of implementation. So, the effective date will be 1st of October and six months from then the council will be reviewing the decision once more.

They will not get a refund on the GST that has already been paid. If any virtual digital assets are being used as a consideration for purchasing a value amount to play in a certain online game, even virtual digital assets will be liable for GST and their definition will be the same as found in the Income tax Act

Lastly, note even offshore gaming platform operators would now have to mandatorily register and in the event this provision is not being followed they may be liable to be prosecuted and perhaps blocked according to the IT Act regulations.

GST Implement on Total Value of Consideration Received

The Group of Ministers under the chairmanship of the Meghalaya Chief Minister was examining the issue of taxation related to online gaming, casinos and horse racing. In the GST Council report, the 28% GST was imposed on these three activities but in the final report it has proposed that 28% GST will charge on total value of consideration received on online gaming, casinos and horse racing including the entry fees. Also it is included that on initial purchase of casino chips the GST charge on casino is 28% then there is no further GST will be charged on new bets and previous round earnings.

Current Taxability of Online Gaming, Casino, and Online Lottery

As per the current law of the GST regime, the online games are divided into two categories, first based on skills or chance. So, the chance of winning depends on the expertise, practice and on the experience of the player. For example - Rummy and fantasy sports games like Dream 11, MPL, My 11 Circle, etc. 

The skill games have lower tax rate applicability of 18% GST, on the other hand, games such as betting, gambling and horse racing are the game of chance. These games can be divided into three categories:

1. A game of pure skill such as chess or cricket.
2. A game of pure chance such as craps, video poker, three cards.
3. A game of mixed skill and chance such as rummy, bridge.

By implementing the 50th Council report, it has been stated that 28% GST will be charged on full face value such as on purchasing the chips in casino, bets placed in online gaming and bookmakers, and bets placed on horse racing and not on Gross Gaming Revenue. 

Currently the GST on online gaming and casinos are - Game of Skills, 18% GST is charged on games such as e-sports, puzzles, and card games. So, it is chargeable under HSN 998439 on the platform's commission/ service fees or on GGR. Game of Chance, GST on casino is 28% including gambling under HSN 999692 or a total bet value.

How the GST Calculated on Online Gaming and Casino?

Mostly an online gaming platform has money in two ways:

1. Platform fees or entry fees for participating in the game usually are 10%-20%.
2. Portion of money which is kept aside to distribute the prize money.

For a game of skill the charge is 18%. Here’s an example: 20 card players bet of Rs. 200 with a platform fee of 5%. Then the GST chargeable will be:

• Platform Fee = Rs.200 * 10% * 10
• Platform Fee = Rs.200
• GST chargeable = Platform Fee * 18%
• GST chargeable = Rs.200 * 18%GST chargeable = Rs.36

For games of chance the GST rate is 28% on the entire gross value. As per the previous example, 

• GST chargeable: Rs.200 * 28%
• GST chargeable = Rs.56

How Does GST Rate Change Affect the Industry?

The online gaming industry is showing their anger on the decision taken by the GST council. It is to impose the 28% GST on the total turnover of online gaming. Industry stakeholders are saying that decision is irrational, and unconstitutional and this move will kill the skilled online gaming sector in the country.

Before this decision, the online gaming companies were paying 18% GST on Gross Gaming Revenue. Along with this, they have to pay 30% TDS on the winnings. It is expected that the collection will increase 10 times because of this decision.

After imposing the GST on horse racing, online gaming, and casino the people look for offshore or illegitimate platforms which do not charge GST. This step can become a disadvantage for the government and can lead to loss in revenue.

• A flat 28% GST rate on online games and skill games. The GST will be charged on ‘Gross Revenue’ basis, on total stake value and not on the platform fees paid.
• For casinos, a flat 28% GST will be paid on the total value of chips bought on a time of entry. There is no GST applicable on betting made in multiple rounds including the winning bet in the previous rounds.

Conclusion

The 28% GST amount is a higher amount. So the step is taken to discourage the young people to not fall into the trap and get addicted to online gaming, casino, lottery. Rate of GST is same for games of skills and chance both. Motive behind it was not to kill the industry players but to set the moral question that these online games and casinos cannot charge GST on face value.

Also read:  Mandatory e-Invoice for Businesses with Turnover More Than Rs 5 Crore

Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.