• Notification Date: 14-08-2023
• Notification No: N/A

New Amendments to GST Act to tackle Money Laundering

Aiming to tackle money laundering allegations within the realm of online gaming, the government is set to introduce the Central Goods and Services Tax (Amendment) Bill, 2023, and the Integrated Goods and Services Tax (Amendment) Bill, 2023, for deliberation and approval in the Lok Sabha today.  

Following the Union Cabinet's recent endorsement, amendments to the GST law propose to incorporate online gaming, casinos, and horse racing under the 28 per cent tax bracket. Individual states will similarly need to modify their distinct GST regulations. Pending passage, this new tax framework is slated to take effect on October 1, in accordance with the decisions reached at the recent GST council meeting. 

The GST Council, during its 50th meeting, recommended subjecting actionable claims associated with casinos, horse racing, and online gaming to a uniform 28 per cent tax rate, irrespective of the classification of these activities as games of skill or chance. 

Furthermore, the Council has advised potential revisions to the law to ensure clarity in this regard. Additional amendments to the provisions of the Central Goods and Services Tax Act, 2017, and the Integrated Goods and Services Tax Act, 2017, have also been proposed. 

With respect to online gaming and actionable claims in casinos, the Council has proposed assessing their value based on the sum paid or deposited by players to the supplier, excluding previous winnings. This approach contrasts with taxing the total value of each bet placed. 

During its deliberations, the GST Council took into consideration the adverse societal implications of online money gaming, particularly on youth, highlighting the emergence of Internet Gaming Disorder due to excessive online gaming. 

The Council also compared the taxation rates applicable to essential items like food with the rates applied to online gaming and casinos, recognising potential disparities. 

As part of the proposed amendments through "The Integrated Goods and Services Tax (Amendment) Bill, 2023," a unique provision has been introduced to establish tax liability for foreign suppliers engaged in online money gaming. Additionally, simplified GST registration procedures for such overseas suppliers are outlined, along with provisions empowering authorities to block non-compliant platforms. 

For intangible goods, such as actionable claims in online money gaming that do not involve physical cross-border movement, the amendments propose granting the government authority to designate such goods. This would enable the levying and collection of IGST (Integrated Goods and Services Tax) upon the import of such items under the provisions of the IGST Act. 

According to government sources, this decision is poised to play a pivotal role in countering money laundering, illicit income, black money, and other unlawful activities linked to online gaming. Furthermore, it is expected to enhance efforts to detect and penalise tax evasion and fraudulent practises. The GST Council has also resolved to assess the impact of these proposed amendments and valuation rules six months after their implementation.