Finance Minister Clarifies Prospective Application of 28% GST on Online Gaming Bets, Excludes Winnings from Valuation Rules

Finance Minister Nirmala Sitharaman clarified that the 28% GST on entry-level bets on online gaming will apply prospectively, with valuation rules excluding winnings
Finance Minister- Prospective Application - Online Gaming Bets - TAXSCAN

Finance Minister Nirmala Sitharaman clarified on Tuesday that the 28 per cent Goods and Services Tax (GST) on entry-level bets on online gaming platforms will be applicable prospectively, with valuation rules excluding winnings.

Addressing the Lok Sabha during discussions on the GST (Second Amendment) Bill, which includes age limit caps for GSTAT president and members, Sitharaman emphasized that confusion should be avoided regarding the taxation of online gaming.

Effective from October 1, the clarification ensures that bets made from the winning amount on online gaming portals will not incur a 28 per cent GST. In August, the GST Council had affirmed the application of 28 per cent GST on online gaming, leading to parliamentary approval of amendments to the Central GST Act in the same month.

The amendments specify that GST will be imposed on entry-level bets rather than on the amounts players wager in each game from their winnings. Sitharaman illustrated this with an example, stating that if a Rs 1,000 bet results in a Rs 300 win, and the player then places another Rs 1,300 bet, GST will not be levied on the winning amount.

In September, GST field officers issued notices totaling over Rs 1.12 lakh crore to several online gaming companies for alleged tax underpayment. The companies have taken the matter to court, and it is currently under judicial review.

Responding to a question in the Rajya Sabha about tax evasion and show cause notices to online gaming companies, Minister of State for Finance Pankaj Chaudhary had stated on December 5, “71 show cause notices involving GST to the tune of Rs 1,12,332 crore have been issued to online gaming companies during financial years 2022-23 and 2023-24 (up to October 2023).”

He had clarified that as these notices are pending adjudication and the respective GST demand has not been determined under the provisions of the CGST Act, 2017.

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