The Parliament on Friday cleared amendments to the Goods and Services Tax laws to facilitate the levy of 28% GST on the face value of all bets made in casinos, horse-racing and online gaming.
Along with amendments to the Central and Integrated GST laws that were cleared without discussion by the Lower House of Parliament, States will also have to make legislative changes to their respective GST Acts for the 28% levy to kick in. The Rajya Sabha returned the Bill to the Lok Sabha by Friday afternoon, paving the way for its enactment.
Finance Minister Nirmala Sitharaman had indicated an October 1 target date to roll out the tax and a assured a review of the levy, that the fast-growing online gaming sector has termed as detrimental for investments and jobs, six months after implementation. The industry remains anxious about the levy’s effects on their prospects, with some online gaming firms announcing lay-offs or closures over the past week.
Approved by the GST Council earlier this month, the legislative changes, moved through the Integrated GST (Amendment) Bill, 2023 and The Central GST (Amendment) Bill, 2023, include a provision that makes it mandatory for offshore online money gaming firms providing services to Indian users to register in the country and pay taxes or face access blockages.
While the Council had approved a 28% GST levy on wagers made in these sectors at its meeting in July 11, it was reconvened on August 2 to review the move in light of representations from industry and the Electronics and IT Ministry that is in charge of the e-gaming policy.
The Council decided to stick to its decision despite dissent from States like Sikkim and Goa that wanted the tax to be levied on gross gaming revenues as is the current practice, rather than the face value of bets. It, however, clarified that earnings from bets would not face repeat taxation.
Amendments to the Central GST law include definitions for online gaming, online money gaming, specified actionable claim and virtual digital assets. Schedule III of the Act, that currently includes an entry for lotteries, betting and gambling, will be amended to include “specified actionable claim” so as to provide “clarity regarding taxability of actionable claims involved in or by way of casinos, horse racing and online gaming,” the Bill’s statement of objects and reasons noted.
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While the changes will enable the GST levy on monetary deposits on gaming portals, including those done through crypto assets, it is still not clear whether a mere recharge of payment wallets would imply a ‘supply’, EY India tax partner Saurabh Agarwal said.
“This issue is likely to be the subject of interpretation in the time to come,” he noted, adding that the amendments would help the Revenue Department defend past litigations with industry.
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Tanushree Roy, director – indirect taxation at Nangia Andersen India, said the changes will bring much needed clarity to the interpretation of activities in these sectors under the GST law and added that any person supplying online money gaming services from a location outside India to an individual in India would now be required to register for GST compulsorily.
“The 28% GST on has already caused layoffs in the online gaming sector and more could follow. It would make the sector lose its sheen for investors,” said Ranjeet Mahtani, partner at Dhruva Advisors.
