Online Gaming: 28% GST To Be Implemented From Oct 1, To Be Reviewed After 6 Months

The GST Council’s decision to levy 28% GST on real-money gaming will be implemented from October 1 and will be reviewed six months after it comes into effect, the Council decided in its meeting on Wednesday (August 2).

In a press conference after the GST Council’s meeting, Finance Minister Nirmala Sitharaman said that the GST Act amendment for 28% GST levy would be taken up in the ongoing Monsoon Session of the Parliament and the likely date of implementation would be October 1, 2023.

The minister also clarified that 28% GST would be applicable on the amount being paid at the entry level for online gaming.

“The Council recommended that valuation of supply on 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 the games, bets out of winnings of previous games and not on the total value of each bet placed,” Sitharaman said after the 51st meeting of the GST Council.

The GST Council also recommended certain amendments in the CGST Act 2017 and IGST Act 2017, including amendment in Schedule III of CGST Act, 2017, to provide clarity on the taxation of supplies in casinos, horse racing and online gaming.

Last month, the GST Council decided to levy 28% GST on online real-money gaming on full face full value. The move came under heavy criticism from industry stakeholders, with many gaming startups, industry bodies and investors writing to the government seeking to rethink the decision. However, the GST Council has stuck to its guns.

Commenting on the clarifications issued by the Council today, the E-Gaming Federation (EGF) and the Federation of Indian Fantasy Sports (FIFS), in a joint statement, said, “The new tax framework, while clarifying and resolving uncertainty, will lead to a very burdensome 350% increase in GST and set the Indian online gaming industry back several years. However, it will allow gaming companies a fighting chance to innovate and rebuild the foundation of gaming in India.”

Meanwhile, the All India Gaming Federation (AIGF) said, “We believe the decision by the GST Council of valuation on deposits will severely impact the online gaming sector and result in a situation where a majority of players, including the MSMEs will no longer be able to survive in the face of the increased tax liability of 400-500%.”

“Only established and well entrenched skill-gaming companies may be able to scrape through this change by using their existing capital reserves to counter the effects of substantially increased tax liability. However, even their revenues and valuations will significantly fall,” it added.

Additionally, companies at their early growth stages, particularly those within the startup and the MSME sector, will be disproportionately impacted, the industry body said.