FM Nirmala Sitharaman: 28% GST on online gaming from October

India will impose 28% goods and services tax (GST) on the full face value of bets placed in online games, including overseas platforms, as well as casinos and horse racing.

The move, ignoring entreaties by online gaming companies for a reprieve, will come into effect on October 1, the finance minister said. Redeployed winnings will not face the tax that will be levied only on the actual cash or equivalent deposits by the players, addressing a key concern raised by the industry over repetitive taxation, the minister said.

The GST Council, the apex decision-making body for the indirect tax, also decided on Wednesday to make registration in India mandatory for offshore gaming companies, which will face action for any violations, including being blocked under the Information Technology Act.

The Centre will bring amendments to the central GST law in the ongoing monsoon session of Parliament. Following this, states will pass the amendments in their respective assemblies to pave the way for the introduction of changes in the law by October 1.

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Briefing reporters after the specially summoned virtual meeting of the council, Union finance minister Nirmala Sitharaman said the move will be reviewed six months after implementation. States such as Delhi and Goa had demanded a review of the decision to impose the tax taken on July 11.

Industry had made representations on the levy to the government, including the Prime Minister's Office, after the July 11 decision. The decision offers no respite to the industry that has opposed the levy.

“The new tax framework, while clarifying and resolving uncertainty, will lead to a very burdensome 350% increase in GST and set the Indian online gaming industry back several years,” the Federation of Indian Fantasy Sports and E-Gaming Federation said in a joint statement.

Sitharaman said the Delhi finance minister opposed the levy of the tax on online gaming while Goa and Sikkim wanted the levy on the gross gaming revenue (GGR) and not on the full face value. Sitharaman, however, said other states including West Bengal, Karnataka, Gujarat, Maharashtra, and Uttar Pradesh wanted the decision taken at the last meeting to be implemented.

“It may not be unanimous, but it is near unanimous decision,” revenue secretary Sanjay Malhotra said. The council also discussed the language of amendments that will be needed to enable taxing online gaming, she added.

“The new levy, after required changes are made in the central and state laws, is likely to come into effect from October 1,” she said.

The council also decided that the payments received and winnings paid in virtual digital assets (VDAs) by online gaming companies and casinos will face GST.

This will bring both overseas and domestic online gaming companies that accept and make payments in VDAs such as cryptocurrency under GST.

The council approved the definitions of “online gaming” and “online money gaming,” making a distinction between the two. Asked if the tax authorities will go after companies that were paying 18% tax on gross gaming revenues, Malhotra said that the amendments were “clarificatory” in nature, so there was no question of their prospective or retrospective application.

He pointed out that the government had filed a special leave petition (SLP) in the Supreme court on August 1, challenging a decision of the Karnataka High Court that quashed the GST authorities' showcause notice to online gaming company Gameskraft over the payment of Rs 21,000 crore tax.