Online gaming companies to collect 28% on full bet value, offshore platforms to be GST registered from October 1

The finance ministry late on Friday notified October 1 as the appointed date for the amended provisions in Central GST and Integrated GST laws to come into effect

October 01, 2023 05:47 am | Updated 07:15 am IST - New Delhi

From October 1, online gaming companies will charge 28% GST on full value of bets. Representational photo

From October 1, online gaming companies will charge 28% GST on full value of bets. Representational photo | Photo Credit: AFP

From October 1, online gaming companies will charge 28% GST on full value of bets, while offshore platforms too would be required to have GST registration to operate in India.

The Finance Ministry late on Friday notified October 1 as the appointed date for the amended provisions in Central GST and Integrated GST laws to come into effect.

E-gaming companies, however, flagged that since many states are yet to pass amendments in their respective State GST (SGST) laws, this notification by the union government in CGST and IGST laws will create confusion.

According to the changes to the Central GST Act, online gaming, casinos and horse racing will henceforth be treated as "actionable claims" similar to lottery, betting and gambling and subject to 28% Goods and Services Tax (GST) on full face value of bets.

The amendments to Integrated GST (IGST) Act makes it mandatory for offshore online gaming platforms to take registration in India and pay 28% tax in accordance with the domestic law.

The amendments will also provide for blocking access to online gaming platforms located overseas in case of failure to comply with registration and tax payment provisions.

In its meetings in July and August, the GST Council, comprising finance ministers of Centre and states, had approved amendments to the law to include online gaming, casinos and horse racing as taxable actionable claims, and clarified that such supplies would attract 28% tax on full bet value.

Parliament last month passed amendments to the Central GST and Integrated GST laws to give effect to the Council's decision. Following that, rules for valuation by these companies were also notified on September 6.

The Finance Ministry has now notified that October 1 will be the appointed date for implementation of these provisions.

In a letter to Revenue Secretary Sanjay Malhotra, All India Gaming Federation (AIGF) sought to know that with around 15 states yet to make changes to their respective State GST laws, what would be GST treatment that ought to be adopted by online gaming companies registered in those states in relation to deposits received from players of those states.

It requested the Centre to “reconsider these notifications and suspend them till all the states pass their respective amendments, in line with the scheme of GST and the judgment of the Supreme Court of India and in the meanwhile, address the aforesaid issues vide necessary clarifications so that at an operational level, the industry has some clarity and can accordingly align its processes and technology.”

EY Tax Partner Saurabh Agarwal said online gaming companies will also need to create a data repository to store customer information and other data required for undertaking GST compliances in India for a specified period of time.

“It is important for online money gaming companies to comply with the new GST regulations in order to avoid any penalties in the future,” Mr. Agarwal said.

KPMG Indirect Tax Head & Partner, Abhishek Jain said with the said provisions being made effective from October 1, industry needs to ensure appropriate readiness for adoption of the revised taxation.

“While most provisions for the revised taxability have been notified, ambiguity on certain matters continue including classification of the supplies made, time of supply, transition provisions, etc,” Mr. Jain said.

AIGF Spokesperson said the central government has notified the applicability of the new GST regime for online gaming from October 1, 2023. However, it seems that multiple states have not passed the amendment to their State GST Act.

“This is creating a conundrum where the online gaming companies in such states will have to charge CGST but not SGST. At the same time in states where the amendment has been done, both CGST and SGST will be charged.

“ In this light the industry is hoping that the government will take cognizance of the situation and allow reasonable time to the industry for transition,” the AIGF spokesperson said.

The GST Council in its meeting in August had decided that the amended provision to classify these supplies as actionable claims and clarifying the taxation provisions would come into effect from October 1.

A review of the implementation was proposed to be carried out after six months, which is April 2024.

A host of online gaming, like Dream11, and casino operator, like Delta Corp, have received GST show cause notices in this month for alleged short payment of taxes.

Separately, a show cause notice was sent to GamesKraft in September last year for alleged GST evasion of Rs 21,000 crore.

While the Karnataka High Court has ruled in favour of the company, the Centre in July filed a Special Leave Petition (SLP) in the Supreme Court. While staying the HC order, the Supreme Court listed the matter for next hearing on October 10.

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