Introduction: This article provides insights into the Indian Government’s decision to levy a 28% Goods and Services Tax (GST) on online gaming websites. It explains the motives behind the decision, its potential impact on the online gaming industry, the expected tax revenue, and whether any states opposed this decision in the GST Council.
Analysis:
(a) Decision to Levy 28% GST: The decision to impose a 28% GST on online gaming websites stems from the recommendations of the GST Council, a constitutional body comprising representatives from the Union Government and State/UT Governments. Actionable claims related to betting and gambling supplied in online gaming have been subject to 28% GST since the introduction of GST in July 2017.
(b) Potential Impact on Online Gaming Industry: The imposition of a 28% GST rate on online gaming has raised concerns about its potential adverse impact on the industry. Online gaming companies supplying actionable claims were initially paying GST at 18% on platform fees, ranging from 5% to 20% of the full face value. The industry has contested the 28% levy on actionable claims related to betting and gambling in online gaming. This decision has led to legal disputes and discussions about its impact on the industry’s growth.
(c) Estimated Tax Collection: While the exact estimated tax collection due to the 28% GST on online gaming is not mentioned in the response, it is anticipated that the higher tax rate will contribute to an increase in revenue from the current levels. The change in GST rate could potentially result in higher tax collections from the online gaming industry.
(d) Opposition in GST Council: During the 50th GST Council meeting held on 11th July 2023, the issue of imposing a 28% GST on online gaming was discussed after a report submitted by the Group of Ministers. The GST Council clarified that actionable claims supplied in casinos, horse racing, and online gaming are subject to a GST rate of 28%. This decision was recommended to remove any ambiguity and amend the law. In the 51st GST Council meeting on 2nd August 2023, a few states raised concerns and requested a reconsideration of the matter. However, after thorough discussions, the GST Council decided to maintain its decision made in the 50th meeting.
Conclusion: The decision to levy a 28% GST on online gaming websites has sparked discussions about its potential impact on the industry and tax collections. While the GST Council’s decision to impose this tax rate has been upheld after reconsideration, ongoing discussions and legal proceedings may shed more light on the implications for the online gaming sector in India.
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GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
RAJYA SABHA
UNSTARRED QUESTION NO-2123
ANSWERED ON – 08.08.2023
GST ON ONLINE GAMING
2123. SHRI VIVEK K. TANKHA:
Will the Minister of FINANCE be pleased to state:-
(a) whether the decision of levying 28 per cent tax on online gaming websites was taken with a view to curb the industry;
(b) whether the decision would impact the online gaming industry adversely;
(c) the estimated amount of tax Government expects to be collected due to this tax; and
(d) whether the decision to levy such high tax was opposed by any States in the GST Council?
ANSWER
THE MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a) & (b): GST rates and exemptions are prescribed on the recommendations of GST Council which is a constitutional body comprising members from Union Government and State/UT Governments. Actionable claims in the form of betting and gambling supplied in online gaming attracts 28% GST since the roll out of GST in July, 2017.
(c): Online gaming companies supplying actionable claims are currently paying GST at the rate of 18% on platform fees ranging from 5% to 20% of the full face value, disputing the 28% levy on actionable claims in the form of betting and gambling supplied in online gaming before various legal fora. It is anticipated that the levy of 28% on full face value as recommended in the 50th GST Council meeting, will result in increase of revenue from current levels.
(d): The issue of 28% GST on online gaming was placed before the GST Council in the 50th meeting held on 11.07.2023, after Group of Ministers constituted to look into the issues related to the supply of actionable claims in casinos, race courses and online gaming, submitted its report. After detailed deliberations, the GST Council in the 50th meeting held on 11th July, 2023 has clarified that actionable claims supplied in casino, horse racing, and online gaming are leviable to a GST rate of 28% and recommended to carry out amendments in the law to remove any ambiguity.
In the 51st GST Council meeting held on 02nd August, 2023, a few states requested that the matter be reconsidered and after detailed discussion, the GST Council decided to continue with its decision taken in the 50th meeting.
