In a significant development for the online gaming industry in India, the Central Board of Indirect Taxes and Customs (CBIC) has confirmed the implementation of a 28 percent Goods and Services Tax (GST) on online gaming, effective from October 1. The announcement was made by CBIC Chairperson Sanjay Agarwal, signaling a major shift in the taxation landscape for the online gaming sector.
“We are ready to implement a 28 percent GST rate on online gaming from October 1 with the consent of all the states. The law for GST rate on online gaming will have to be passed by the assembly of states. Show cause notices to some online gaming companies are a legal process,” ANI quoted Agarwal as stating.
This development comes after nearly two months since the Lok Sabha passed amendments to two GST laws with a voice vote. These amendments specifically pertain to the insertion of provisions in the third schedule of the Central Goods and Services Tax (CGST) Act, 2017, aimed at providing clarity on the taxation of supplies in casinos, horse racing, and online gaming.
Additionally, amendments in the Integrated Goods and Services Tax (IGST) Act involve the insertion of provisions to impose GST liability on online money gaming services offered by offshore entities. Under these amendments, such offshore entities would be required to obtain GST registration in India.
Central Finance Minister Nirmala Sitharaman had previously announced, “The council recommended that valuation of supply on online gaming & actionable claims in casinos may be done based on the amount paid or payable to the supplier by/or on behalf of the player, excluding the amount entered into the games, bets out of winnings of previous games & not on the total value of each bet placed.” This clarification aims to streamline the taxation process for these activities.
The Centre believes that these amendments will provide much-needed clarity regarding the taxation of supplies in casinos, horse racing, and online gaming, bringing transparency to an industry that has seen significant growth in recent years.
However, there is a challenge on the horizon. As of now, not all states have passed the required legal amendments to support the implementation of the 28 percent GST on the face value at the entry level for online gaming, casinos, and horse racing. When asked whether this might lead to a delay in the implementation, CBIC Chairman Sanjay Kumar Agarwal declined to comment.
The impending GST taxation on online gaming represents a notable development in the Indian gaming industry, with both players and operators set to be affected by these changes. As October 1 approaches, the industry and states are working to align their processes with the new tax regulations, potentially reshaping the landscape of online gaming in India.