A Group of Ministers has arrived at a consensus on a flat 28 per cent GST rate for online gaming along with casinos and racing. However, the GoM will finalise the report in its next meeting after deliberations on the value, i.e. base on which GST is to be calculated.
“We arrived at an agreement for 28 per cent rate on all three (online gaming, casinos, horse-racing). Another meeting will take place within the next 10 days where we will discuss the issue of valuation. Accordingly, we will finalise the report and submit it to the GST Council,” a GoM member told BusinessLine after the meeting ended on Monday evening.
As on date, online gaming has a dual rate of taxation- 18 per cent on game of skill ( not involving betting or gambling) and 28 per cent on game of chance (game involving betting and gambling). Most online gaming apps pay GST of 18 per cent. Both casinos and horse racing attracts GST at the rate of 28 per cent. However, the issue here is more about value for calculation of GST.
The GoM has Meghalaya CM K Sangama as convenor while Deputy Chief Minister of Maharashtra Ajit Pawar, Finance Minister of Uttar Pradesh, Suresh Khanna, Finance Minister of Gujarat, Kanubhai Patel, Finance Minister of West Bengal Chandrima Bhattacharya, Panchayati Raj Minister of Goa, Mauvin Godinho, Finance Minister of Tamil Nadu, P Thiaga Rajan and Finance Minister of Telangana, T Harish Rao are the members.
Monday’s meeting was the first after the GoM was constituted, last year. In the intervening period, it has reconstituted twice — this February and in last June.
Impact on gaming industry
Commenting on the latest development, Ankur Gupta, Practice Leader (Indirect Tax), SW India said that keeping online gaming, casinos and horse racing in the same bracket of 28 per cent would hit the online gaming industry very hard.
“The other two (casinos and horse racing) would still be gambling activities and hence, sin tax of 28 per cent can be applied. But most of the online gaming cannot be considered as gambling activity. Clubbing it with the other two would impact the entire business model of the gaming industry. The Government should at least consider excluding games that require skill and not merely luck,” he said.
The tech industry body IndiaTech.Org has been pressing hard for online skill-based gaming to be treated differently from gambling, betting and horse racing. The industry body has been arguing that a clarification be issued that Rule 31A is not intended to cover games of skill and is, therefore, not applicable to any form of online gaming where there is a preponderance of skill over chance (thereby covering online fantasy sports as well as online skill based casual games and sports). Further, it argued, Gross Gaming Revenue or the Platform Fee alone should continue to be considered as the value of supply as per current practice.
“Additionally, if there are other formats/ revenue models followed by platforms such as subscription fee, in-game revenue etc, in such cases GST should be applicable on only the amount that is received by the platform for providing its services and no GST shall be charged on the prize pool that is kept for the purpose of distribution among the players,” the industry body said in the letter sent to GoM.