Tax online gaming under GST
The Indian government plans to impose a 28% Goods and Services Tax (GST) on online gaming, casinos, and horse racing, set to be effective from October 1, 2023. The tax will apply to the contest entry amount but not on the winnings, offering some relief to the online gaming sector. However, dissenting views have been expressed by three states, namely Delhi, Sikkim, and Goa. They have raised concerns about taxing the full amount and prefer that the GST be levied on the gross gaming revenue.
Union Finance Minister Nirmala Sitharaman announced that the decision will be reviewed after six months from implementation to address these concerns. While most states favor the 28% GST, Tamil Nadu, which has banned online gaming, seeks clarification that the GST will not be applicable within the state.
Offshore online gaming companies will be required to register in India for GST purposes. Specific provisions will be introduced to the Integrated Goods and Services Tax (IGST) Act, 2017, to deal with offshore entities, including the ability to block non-compliant sites. A monitoring cell under the Directorate General of GST Intelligence will oversee offshore gaming companies to ensure tax compliance.
Industry players have welcomed the clarification on the tax but expressed concerns about the significant increase in GST, potentially affecting the Indian online gaming industry’s growth. The Federation of Indian Fantasy Sports and E-Gaming Federation, representing 50 Indian online gaming companies, appreciates the government’s response to industry concerns.
The amendment to the GST Act will also distinguish between online gaming and online money gaming, with the latter subject to GST. Overall, the move aims to streamline the taxation of online gaming activities and enhance compliance with GST regulations in India.
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