Key Highlights of 51st GST Council Meeting held on 2nd August, 2023

The 51st GST Council meeting, held virtually on 2nd August, 2023, chaired by Union Minister for Finance & Corporate Affairs Smt. Nirmala Sitharaman, introduced significant changes to the taxation landscape of online gaming and casinos. This piece sheds light on the key takeaways and their implications for the gaming industry. These changes / clarifications are highlighted in our note as below:

1. The Council has proposed rate and valuation on actionable claims supplied in Casino, Online gaming and horse racing. They are as follows:-

1.1 The Council has proposed to tax actionable claims supplied in Casino, Online gaming and horse racing at 28% on full value, irrespective of whether the activities are a game of skill or chance, but notifications or rules will be issued to provide further clarification on the subject matter.

1.2 The Council has recommended that, tax will be applicable on the amount paid or payable to or deposited with the supplier, by or on behalf of the player (excluding the amount entered into games/ bets out of winnings of previous games/ bets) and not on the total value of each bet placed in respect of supply of online gaming and actionable claims in casinos.

KSAA Comments:

1.3 The school of thought that GST being a transaction based tax, GST must be levied on each bet placed as it represents the consideration paid by a person for supply of actionable claim in the form of chance to win. Alternatively, it has been proposed that the 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, by or on behalf of the player (excluding the amount entered into games/ bets out of winnings of previous games/ bets) and not on the total value of each bet placed.

2. The Council, proposed to insert special provision under IGST Act, 2017, wherein if supply of online money gaming is supplied by a supplier located outside India to a person in India, then such supplier is required to take a single registration in India through a simplified registration scheme and shall be taxable under IGST Act, 2017.

3. Further it is proposed that, in case supplier located outside India fails to obtain the registration as specified above and fails to make the payment of tax then, any computer resource used for supply of online money gaming shall be blocked for access by the public to any information generated, transmitted, received or hosted by any computer resource.

Conclusion: The 51st GST Council Meeting has significantly reshaped the online gaming and casino sectors in India. The proposed changes aim to ensure a more structured and equitable tax system for these industries. However, the implementation and interpretation of these provisions will play a critical role in determining their real-world impact. With detailed notifications and rules still awaited, stakeholders in the online gaming and casino industries should keep a close watch on further developments.

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Disclaimer: The information provided in this document is intended for informational purposes only and does not constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein.