The world of online gaming and casinos has witnessed significant changes in recent years, not only in terms of the gaming experience but also in the way these activities are taxed. The GST Council’s decision to tax all online gaming activities, regardless of whether they involve chance or skill, has raised important questions about how to value supplies in this industry. This article delves into the GST implications and valuation methods for supplies in online gaming and casinos, shedding light on recent amendments and changes in tax laws.
The GST Council had 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.
CGST Act (Amendment) Bill, 2023 and IGST Act (Amendment) Bill, 2023 were introduced 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 and later by Rajya Sabha and had since been enacted as Act Nos. 30 and 31 on 18.08.2023. These 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 soon or by way of an Ordinance on online gaming.
Gist of CGST (Amendment) Bill / Act, 2023
CGST (Amendment) Bill, 2023 was introduced in Lok Sabha on 11.08.2023 and enacted as Act No. 30 of 2023 on 18.08.2023. The Act provides for 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’, has been substituted by ‘specified actionable claims’.
Gist of IGST (Amendment) Bill / Act, 2023
IGST (Amendment) Bill, 2023 was introduced in Lok Sabha on 11.08.2023, has since been passed by Lok Sabha on same day and enacted as Act No. 31 of 2023 on 18.08.2023. The Act provides for 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].
These shall be effective from a date to be notified later.
Valuation of Supplies
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.
Value of Supply for Online Gaming
CBIC has notified new Rule 31B for value of supply in case of online gaming including online money gaming vide Notification No. 45/2023-CT dated 06.09.2023.
- As per new Rule 31B, the value of supply of online gaming, including supply of actionable claims involved in online money gaming, shall be the total amount paid or payable to or deposited with the supplier by way of money or money’s worth, including virtual digital assets, by or on behalf of the player.
- However, any amount returned or refunded by the supplier to the player for any reasons whatsoever, including player not using the amount paid or deposited with the supplier for participating in any event, shall not be deductible from the value of supply of online money gaming.
- It may be noted that any amount received by the player by winning any event, including game, scheme, competition or any other activity or process, which is used for playing by the said player in a further event without withdrawing, shall not be considered as the amount paid to or deposited with the supplier by or on behalf of the said player.
- This shall come into force from a date to be notified later.
Value of Supply of Actionable Claims, i.e., Casino
CBIC has notified new Rule 31C for value of supply of actionable claims in case of casino vide Notification No. 45/2023-CT dated 06.09.2023.
- Accordingly, the value of supply of actionable claims in casino shall be the total amount paid or payable by or on behalf of the player for –
(i) purchase of the tokens, chips, coins or tickets, by whatever name called, for use in casino; or
(ii) participating in any event, including game, scheme, competition or any other activity or process, in the casino, in cases where the token, chips, coins or tickets, by whatever name called, are not required
- However, any amount returned or refunded by the casino to the player on return of token, coins, chips, or tickets, as the case may be, or otherwise, shall not be deductible from the value of the supply of actionable claims in casino.
- It may be noted that any amount received by the player by winning any event, including game, scheme, competition or any other activity or process, which is used for playing by the said player in a further event without withdrawing, shall not be considered as the amount paid to or deposited with the supplier by or on behalf of the said player.
- This shall come into force from a date to be notified later.
Conclusion:
The taxation of online gaming and casinos has undergone significant changes with the introduction of GST and related amendments. Understanding the implications of these changes, including the valuation of supplies, is essential for both players and businesses operating in this industry. As the digital gaming landscape continues to evolve, it is crucial to stay informed about tax regulations to ensure compliance and avoid legal issues related to GST.
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