The Goods and Services Tax (GST) Council in India has made significant changes in the taxation of various activities such as betting, gambling, casinos, horse racing, lottery, and online money gaming. These amendments have implications for both businesses and consumers. In this article, we will delve into the details of these changes and their impact on the gaming and gambling industry in India.
The GST Council has taken decision to impose GST on “Betting, Gambling, Casinos, Horse Racing, Lottery & Online Money Gaming “ under the GST Law. Based on the Council’s recommendation, Government of India amended the CGST Act by Act No. 30 of 2023 on 18.08.2023 to impose GST @ 28% w.e.f. 01.10.2023. CBIC has issued Notification No.11/2023-Central Tax (Rate) dated the29th Sept, 2023.
Following are the details of amendments made:-
(i). Section. 2 (80A) provides for definition of ‘online gaming’,
(ii). Section 2 (80B) provides for definition of ‘online Money Gaming,’
(iii). Proviso under Section 2 (105) has been inserted to provide clarity on who is the supplier in case of supply of specified actionable claim,
(iv). Section 2(117A) ‘Virtual digital asset’ has been defined.
(v). Clause (xia) has been inserted under Section 24 to provide for mandatory registration of the person supplying online money gaming from a place outside India to a person in India, and
(vi). “In Schedule III”, the words “Lottery, Betting and Gambling” have been substituted by “Specified actionable claims”
What is the meaning of Gambling?
Gambling means “ Play games of chance of Money”.
What is the meaning of Betting?
Betting means” games wherein both skill and chance are involved such as rummy, poker etc. It is predominately a game of chance and therefore will be treated as ‘betting’ or ‘gambling’. Betting is illegal in India and hence advertisements/ Promotion of such activities directly or indirectly on any of the media platforms fall under illegal acts.
What is the meaning of Lottery?
Lottery means” a drawing of lots in which prizes are distributed to the winners among persons buying a chance.
What is the meaning of Betting, Gambling and Lottery under GST Law?
As per Section 2 (52) of the CGST Act, 2017, ‘Betting, Gambling and Lottery’ are actionable claims and come within the definition of goods. Hon’ble Supreme Court has held in the recent judgment that Betting, Gambling and Lottery are taxable under the CGST Act,2017.
‘Actionable claims’ means “A claim to any debt other than a debt secured by mortgage of immovable property or hypothecation or pledge of movable property. The Activates relating to betting, Gambling and Lottery are subject to GST only and no actionable clime is covered under the GST by virtue of amendment to Schedule III.
What is the meaning of Casino?
Casino means “a public room or building where gambling” games are played.
What are online real money games?
Real Money Gaming is a business structure where users play games for real money with the hope of winning more than they initially invested. The game operator generates income by charging users a network fee and a flat commission based on how much they bet in each game. Real Money is in the hopes of winning more money. These games can include Casino-Style games such as poker, Roulette, blackjack and slot machines as well as sports betting, fantasy sports and other types of online gaming that involve the exchange of money.
In India these types of games have become increasingly popular, leading to concerns about their regulation and potential negative effects on users, such as addiction and financial losses.
So, the Ministry of Electronics and Information Technology (MEITY) has announced an amendment to the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules,2021 to regulate Online Real Money Games.
New rules on online betting platforms have advised media entities, media platforms and online advertisement intermediaries to refrain from carrying a advertisement/promotional content of betting platforms.
The Hon’ble high Court of Bombay ruled in the case of GURUDEEP SINGH SACHAR vs. UNION OF INDIA and OTHERS, that GST is not applicable on the player’s entire deposit, but only on the consideration collected for the supply of goods or services within the platform.
Further, recently the Hon’ble Supreme Court of India, expressed the view in the case of VARUN GUMBER v. UNION TERRITORY OF CHANDIGARH and Ors, that Dream 11 was a game of skill and such games aren’t covered under the Public Gambling Act.
Further the Hon’ble Supreme Court upheld the constitutional validity of levying GST on Lottery, Betting and Gambling in M/s. Skill Lotto Solutions Pvt Ltd. Vs. Union of India.
As per the judgment of the Hon’ble Supreme Court of India , levy of GST on lotteries, betting and gambling are actionable claims and come within the definition of goods under Section 2 (52) of the CGST Act,2017. As per Schedule III of CGST Act, 2017, actionable claims other than lottery, betting gambling are neither treated as supply of goods not supply of services.
Parliament has an absolute power to go for an inclusive definition of the term ”goods” to include actionable claims lottery, gambling and betting. As per Article 246A of the Constitution, Parliament can make laws with respect of goods and services tax and expansive definition of goods given in Section 2(52) cannot be said to be not in accord with the constitutional provisions.
On the above judgment of the Hon’ble Supreme Court of India, the Group of Ministers proposed to do away the distinctions of classifying online games into skill or chance, as it complicated tax calculations, So, they have made the following recommendations:
- A flat rate @28% on all online games, including skill games. Further, this rate will be chargeable on a gross revenue basis.
- In the case of Casino a flat rate @28% will apply to the total value of chips bought at the time of entry, however, no GST is applicable on betting made in multiple rounds, including bets made with winnings from the previous round.
Based on the GST Council’s recommendations the CBIC has issued Notification No.11/2023-Central Tax (Rate) dated the29th Sept, 2023. w.e.f.01.10.2023. As per such notification, they have inserted in Schedule IV:-
- After S.No.227 and the entries related thereto, the following S. No and entries shall be inserted, namely:-
|
S. No. |
Chapter | Specified Actionable Claim |
| 227A | Any Chapter | Explanation:” specified actionable claim” as defined in Section2(1) of the CGST Act,2017 means the actionable claim involved in or by way of –
(i) betting, (ii) casinos, (iii) gambling, (iv) Horse racing , (v) lottery; or (vi) Online money gaming. |
| 228 and 229 | 228 and 229 and the entries relating thereto shall be omitted. | ——— |
Service Providers of organised Casino and Online Gaming Services are eligible to claim Input Tax Credit under Section 16(1) of the CGST Act,2017.Who have taken GST registration ,such registered person can avail input tax credit on goods and services used in furthering the business. However, Section 17(5) of the CGST Act imposes some restrictions for when Input Tax Credit cannot be claimed.
Conclusion: The imposition of GST on activities like betting, gambling, casinos, horse racing, lottery, and online money gaming represents a significant change in India’s tax landscape. These amendments aim to regulate and streamline the taxation of these activities, ensuring they contribute to the nation’s revenue. As the gaming and gambling industry evolves, it is essential for businesses and consumers to stay informed about these changes and comply with the updated tax regulations.
So, dear colleagues, kindly refer and provide your valuable suggestions on the above article.
Author Bio
GST on Betting, Gambling,Casino, Lottery & Online Gaming,” published by Taxguru. is a good article, with lot of insight , on this topic.
writer B.S.SEETHAPATHI RAO , has a great command on this suject, and point, are very clear, lot of learning for a common man, nice item,
expecting more from you … keep going