The Goods and Services Tax (GST) Council will meet via video conferencing on August 2 to likely consider legal amendments necessary for implementing a 28 per cent levy on online gaming, casinos, and horse racing.
After blowback from a host of stakeholders on the issue, the Council may also clarify the definition of topics like online gaming, and may clarify the specific actionable claims on which the GST will apply, including betting, gambling, horseracing, casinos and lottery, it is learned.
“The GST Council will approve the law committee proposal on the exact methodology of taxation. While the rate will remain unchanged at 28 per cent , the modalities will be resolved,” a source close to the matter told DH.
“There is a need for clarity as we have received representations from a lot of stakeholders, including gaming companies. The Council will try to address that,” another source said.
In its 50th meeting on July 11, the council agreed to impose GST of 28 per cent on online gaming, horse racing and casinos. The tax is to be levied on the full value of the bet made or the chips bought and there will be no differentiation between skill-based games and chance-based games, the Council had decided after a year of discussions.
To bring this into effect, section 3 of the GST Act will be amended to bring online gaming and horse racing as taxable actionable claims. The Centre is likely to introduce a GST amendment bill in the ongoing monsoon session of parliament which is on till August 11.
So far only 18 per cent GST was applicable on the platform fee, also known as the Gross Gaming Revenue (GGR) for games of skill. Experts argued that the differential treatment for games of chance like casino and games of skill played in online gaming is arbitrary and will face legal challenges.
“There are still some open gaps that need to be filled in, like how overseas gaming companies would come under the GST framework. The way the government intends to tax online gaming and casinos, they should come up with detailed guidelines so that it doesn’t turn into another litigation issue in the future,” underscored Ankur Gupta, Practice Leader - Indirect Tax, SW India.
There have been concerns that the tax impact could be significantly high if GST is imposed on every bet.
Earlier last week, top global and domestic investors including Tiger Global, Peak XV (formerly Sequoia Capital India) and Steadview Capital wrote to the Prime Minister, noting that taxing every game will have a cascading effect and will lead to a taxation of 50 per cent -70 per cent and adversely impact $4 billion in prospective investments in the sector.
Major gaming industry bodies in India - the All India Gaming Federation (AIGF), the E-Gaming Federation (EGF) and the Federation of Indian Fantasy Sports (FIFS), also expressed serious concerns, calling the new regime “catastrophic” for the sector.
Meanwhile, a group of 45 gaming studios also wrote to the Prime
Minister’s Office, the Ministry of Electronics and Information Technology and the Ministry of Information and Broadcasting, seeking a clear distinction between video games and real-money gaming.
Moreover, the Ministry of Electronics and Information Technology (MeitY) is also likely to take up the issue with the GST Council and ask for a possible review, minister of state for IT Rajeev Chandrashekhar had said in a town hall meeting.
While the industry is open to 28 per cent GST, experts argued that taxing only deposits will also not solve the objective of getting more revenue into the sector. The council can rather consider taxation on net deposits, which is cumulative deposits minus cumulative withdrawals, they suggested.
“The regulatory conditions and taxation that affect the competitiveness of the services, must be balanced and proportionate. Otherwise, the whole purpose of the regulation will be defeated,” argued Juan Espinosa, founding partner of Silverback Advocacy.
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