The online gaming industry in India has experienced significant growth, becoming one of the largest markets globally. In the 50th GST Council meeting held on July 11, 2023, the GST Council recommended levying of 28% GST on the full face value on Online Gaming, Casinos & Horse racing, irrespective of whether these activities are considered games of skill or games of chance. This led to an outrage in the gaming industry. Resultantly, the GST Council vide its 51st meeting, stated that the decision will be enforced from Oct. 1, 2023, and will be reviewed after six months of its implementation.
Online gaming is typically skill-based, while online gambling is typically chance-based. This means that in online gaming, players can use their skills and knowledge to improve their chances of winning, while in online gambling, the outcome of the game is determined mostly by luck.
A simplified but mandatory GST registration for overseas platforms offering online money gaming services to Indian consumers, and a special provision bringing tax liability on such platforms, were part of the amendments. Non-compliant offshore gaming platforms or websites will be blocked.
However, experts said the definitions of “online gaming”, “online money gaming”, “specified actionable claim”, and “virtual digital asset” in the amendment are still ambiguous.
The amendments were recommended by the GST Council on 2 August, 2023
Tax authorities have sent notices to several online gaming companies in the past few weeks. On Tuesday, Dream Sports, the parent company of Dream 11 filed a writ petition in the Bombay High Court challenging a GST notice which alleged the evasion of reportedly Rs 25,000 crore. Last week, Delta Crop was also served a tax notice amounting to Rs 1,140 crore on similar grounds.
Any payment made for these activities in crypto assets will also be taxable. Besides, activities wherein players make deposits or pay in monetary form or the form of virtual digital assets (VDAs) with the expectation of winning money or an equivalent, including VDAs, fall under the scope of online money gaming.
The focus of attention is now directed towards the Supreme Court, which is scheduled to review the Central Government’s appeal against the Karnataka High Court’s decision to invalidate GamesKraft’s GST notice. It’s worth noting that the Supreme Court has stayed the Karnataka High Court‘s order quashing GST notice worth Rs. 21,000 crore.
The Supreme Court Division Bench of Chief Justice of India DY Chandrachud, along with Justices JB Pardiwala and Manoj Misra, has called for a response from Gameskraft and scheduled a follow-up hearing in three weeks from the date of the order that is 6th September 2023.
The government has managed to maintain a win-win circumstance. If demand does not change after 28%, revenue statistics will rise exponentially, and if the demand decreases, the government can send a social message stating a decrease in addiction of online gaming. This change will automatically restrict the entry of new players into the online gaming market.
Websites reffered:
https://taxguru.in/goods-and-service-tax/gst-gameplay-online-gaming.html
https://www2.deloitte.com/in/en/pages/tax/articles/gst-on-online-gaming.html
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