Stay informed on the latest GST Amendment Bills! Explore key insights from the 50th and 51st GST Council meetings, focusing on the taxation of online gaming, horse races, and casinos. Get updates on proposed amendments, valuation methods, and the expected enforcement date of October 1, 2023. Learn about the CGST (Amendment) Bill, 2023, and IGST (Amendment) Bill, 2023, providing clarity on online gaming definitions, registration requirements, and more. Don’t miss out on crucial details impacting the online gaming industry.
The 50th meeting of GST Council which was held on 11.07.2023, took various steps and measures towards trade facilitation and streamlining the GST compliances which, inter alia, included acceptance of report of Group of Ministers on GST on casinos, race courses and online games and deciding rate of 28% thereon. In case of online gaming, there were certain issues involving valuation, place of supply, rate of tax on which industry players raised various concerns including even the danger of players including start ups being getting extinct due to being kept under highest tax slab of 28%, that too on gross value or face value of the transaction. The 51st Council meeting held on 02.08.2023 primarily discussed about the taxation of casinos, online gaming and horse races. The GST shall be levied on the actionable claims supplied in casinos at the entry level.
GST on online gaming – Key points from 50th GST Council meeting (11.07.2023)
- GST Council approved the recommendations of Group of Ministers on taxation of online gaming, race courses etc.
- GST shall be applicable on horse races, casinos and online gaming
- GST law shall be amended to include online gaming and horse races in Schedule-III so as to be taxed as actionable claims.
- All such activities shall be taxed at an uniform rate of 28 percent GST
- Tax shall be levied on full face value of chips purchased (casino) or full value of bets placed (horse race, online games) and not on the fees part, if any.
- Online gaming to cover both-games of skills and games of chance with no distinction between them.
- 28% GST on online gaming will not be retrospective.
- Amendment in GST law is imperative which will have to be done fast including by states so as to make online gaming taxable w.e.f. 01.10.2023 as all the states will have to pass the amendment law.
GST on online gaming- Key points from 51st GST Council meeting (03.08.2023)
- Approval of proposed amendments in CGST Act, 2017 and IGST Act, 2017 including Schedule III so as to provide clarity on taxation of supplies in relation to:
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- Casinos
- Horse racing
- Online gaming
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- IGST Act to specifically provide for liability to pay GST on suppliers located outside India who supplies online money gaming to any person in India.
- Foreign suppliers shall have to register in India for which separate procedure will be provided, i.e., registration in India will be mandatory for offshore gaming companies.
- GST to be levied on valuation of supply of online gaming and actionable claim in casinos at entry level.
- Games of chance and games of skill to be treated at par for levy of GST. These terms shall be defined in the law.
- Specific rules shall be framed for valuation of supply of online gaming as well as for supply of actionable claim in casino.
- 28% GST will be applicable on the actual cash or equivalent deposits made by players on an online platform to commence a game and not on the winning amounts redeployed.
- The payments received and winnings paid in Virtual Digital Assets (VDAs) by online gaming companies and casinos will suffer GST. This will bring both- overseas and domestic online gaming companies that accept and make payments in VDAs such as crypto currency under GST.
- It is expected that process of amendments and enforcement of levy of GST on online activities shall be complete by 01.10.2023
- The new levy, after required changes are made in the central and state laws, is likely to come into effect from October, 1.
The Council has decided to tax all online gaming activities irrespective of whether such activities are a game of chance on skill. Both types of online games will be treated at par for tax purposes.
Actionable claims- Meaning / scope
Presently actionable claim are defined under section 2(1) of the CGST Act, 2017. Accordingly, ‘actionable claim’ would mean a claim to any debt, other than a debt secured by mortgage of immoveable property or by hypothecation or pledge of moveable property, or to any beneficial interest in movable property not in the possession, either actual or constructive, of the claimant, which the Civil Courts recognize as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent.
The key elements for any claim to be called ‘Actionable Claim’ are :
(i) It is any type of debt other than a debt secured by mortgage of immovable property or by hypothecation or pledge.
(ii) Any beneficial interest in movable property not in possession of claimant, either actual or constructive.
(iii) Civil courts should recognize such claim as worthy of affording grounds for relief.
(iv) Such claims or interest could be either existing, accruing, conditional or contingent.
(v) Actionable claims can be assigned.
(vi) Actionable claims can be enforced in a court of law.
This definition shall not apply to online gaming and new definition shall be applicable. Schedule III of the CGST Act, 2017 presently provides for that actionable claims other than lottery, betting and gambling shall be considered as activities or transactions which shall be treated neither as supply of goods nor as supply of services. It implies that once the GST laws are amended, following activities can be taxed for the purpose of levy of GST:
i) Lottery
ii) Betting
iii) Gambling
iv) Online games of chance or skill
v) Horse racing
vi) Casinos
First three in the above list are already covered and remaining three shall be added for taxation w.e.f. 01.10.2023.
Valuation
On valuation issue, it is stated that valuation of supply of online gaming and actionable claims in casinos may be done based on the amount paid or payable to or deposited with the supplier or on behalf of the player, excluding the amount entered into games based on the winnings of previous games.
Let’s assume that if one has placed a bet of Rs. 10,000 for online gaming or horse racing or bought a chip of Rs. 10,000 in casinos, he will need to pay GST at the rate of 28 percent. If he wins, say Rs. 3,000 and the total amount in the next bet or chip becomes Rs. 13,000, he will not be required to pay GST on the redeployed winnings amount of Rs. 3,000. However, if he loses Rs. 10,000 and places another Rs. 10,000 that will be considered a fresh bet or chip and will attract 28 percent GST.
Amendment Bills
Finance Minister has introduced CGST Act (Amendment) Bill, 2023 and IGST Act (Amendment) Bill 2023 in the Parliament on 11th August, 2023 to implement decisions of GST Council to levy 28% tax on online gaming. Both the Bills have been passed by the Lok Sabha on same day. This will come into effect from a notified date. It provides for defining online gaming, registration and change in scope of supply (Schedule III) etc. Similar changes are stipulated in IGST Act, 2017. It is expected that all the states will also make the necessary amendments in state GST laws in next two months in the ongoing monsoon sessions or by way of as Ordinance on online gaming.
CGST (Amendment) Bill, 2023
> CGST (Amendment) Bill, 2023 has been introduced in Lok Sabha on 11.08.2023.
> The Bill proposes the following :
- It provides for defining online gaming [section 2 (80A)], online money gaming [section 2 (80B)], specified actionable claim [section 2 (102A)] and virtual digital asset [section 2 (117A)]
- It amends definition of supplier in section 2(105) to provide clarity on who is supplier in case of supply of specified actionable claim
- It provides for mandatory registration of the person for supplying online money gaming from a place outside India to a person in India (section 24)
- In Schedule III, ‘lottery, betting and gambling’, shall be substituted by ‘specified actionable claims’.
> These shall be effective after enactment from a notified date(s).
IGST (Amendment) Bill, 2023
> IGST (Amendment) Bill, 2023 has been introduced in Lok Sabha on 11.08.2023 and has since been passed by Lok Sabha on same day.
> The Bill proposes the following :
- Defines online gaming [section 2(17)]
- Scope of section 5 on ‘integrated tax on goods’ is proposed to be changed to provide ‘goods other than goods as may be notified …’
- Place of supply to any unregistered person to be location of supplier where address of such person is not recorded in the invoice (section 10)
- Provide for special provision for specified actionable claims (online gaming) supplied by a person located outside the taxable territory to a person located in India [Section 14A]
- Provide for special provision of requirement of taking single registration under a simplified scheme, payment of integrated tax on online gaming and blocking of access by the public to any information used for such supplier in case of non- compliance of registration or non-payment of tax [Section 14A].
> This shall be effective after enactment from a date to be notified later.
There is a likelihood of the GST being levied @ 28% w.e.f. 01.10.2023. It is expected to raise about Rs. 2000 crore of tax revenue which is expected to be levied from 1st October, 2023.
While Delhi has opposed the levy of GST, states like Goa and Sikkim have sought a review on valuation, i.e., whether to be levied on face value or gross revenue ? The effective date of 1st October, 2023 will depend as preparedness and seriousness of all states / UTs which does not seem to be happening and this date may be deferred. It will be enforced on all India basis only. Further, the levy of GST on online gaming is also likely to be subjected to lot of litigation.
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