• Notification Date: 03-08-2023
• Notification No: N/A

GST Council meet on 2nd August: Discussions on Online Gaming, Casinos, Horse Racing

The upcoming Goods and Services Tax (GST) Council meeting, which will be held today (August 2), will see discussions on legal amendments in GST-related laws to include online gaming and horse racing under the “actionable claim” head, details about the change in rules to prescribe the determination of the value of supply in case of online money, gaming other than online money gaming and the value of supply in case of casinos and horse racing. 

The meeting to be held via videoconferencing will begin at 1600 IST to take a final call on the levy of 28 percent GST on online gaming, casinos, and horse racing.  

Moreover, foreign online gaming companies may be asked to appoint a representative here, otherwise, the penalty would be levied or such companies could even get prohibited from running their operations domestically. Also, the Council is expected to discuss valuation norms which will be notified as rules. 

Topics of discussion in the Council meeting 

The Council is expected to outline the value of the supply of online gaming (including the supply of actionable claims involved in online money gaming). This is likely to include the total amount paid to or deposited with the supplier by way of money or money’s worth, including virtual digital assets, by or on behalf of the player. 

The Council is also expected to discuss the determination of the value of the supply of actionable claims in casinos, which will include the total amount paid by or on behalf of the player for purchase of the tokens, chips, coins or tickets, for use in the casinos. 

Senior government officials have maintained that there is no revision in the proposal to levy a 28 per cent tax on the face value of online gaming, casinos and horse racing. The amendment in GST law and rules as per the decision taken by the Council in the previous meeting will be put up to the Council for approval as the earlier decision was only in principle, they said. 

The uniform levy of 28 per cent tax is expected to be applicable on the face value of the chips purchased in the case of casinos, on the full value of the bets placed with bookmaker/totalisator in the case of horse racing, and on the full value of the bets placed in case of online gaming. 

Former Decision of the Council 

On 11th July, the GST Council decided to levy a uniform 28 per cent tax on full face value for online gaming, casinos and horse racing. Earlier, the ministerial panel on online gaming, casinos, and horse-racing had discussed the other option of levying tax on gross gaming revenue or platform fee, that is, the charge paid to avail the gaming services, but it did not find favour. 

The government is expected to bring in a legal amendment to facilitate this in the monsoon session of Parliament to enable the inclusion of online gaming and horse racing under actionable claims and hence, facilitate taxation of these categories with no distinction for game of skill or chance. 

While the government has maintained that this decision is not intended to harm any industry, online gaming companies have raised their concerns about the impact of this move on the industry, as it is likely to affect volumes and thus the viability of gaming companies. 

There have been certain discussions about industry concerns on double taxation, especially in online real-money games or casinos, where subsequent winnings also could get taxed at 28 per cent. There could be some tax relief for such instances, one of the officials said. 

Last month, top global and domestic investors including Tiger Global, Peak XV (formerly Sequoia Capital India) and Steadview Capital wrote to the Prime Minister, seeking to review the 28 per cent GST on online gaming. They said that the decision will adversely impact $4 billion in prospective investments in the sector. 

Before that, more than a hundred industry associations representing top gaming companies in the country including Dream 11 and Mobile Premier League issued an open letter to the government on the tax decision, saying that it has left the industry in “significant distress” and could have “devastating implications” for the companies, including a shutdown of businesses.