Tax Insights

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1 PwC pwc.in

3 August 2023

GST on online gaming and casinos to be levied on face value at entry level; rate remains unchanged at 28%, and proposed changes are expected to be implemented from 1 October 2023 – 51

^st

GST Council meeting

In brief

The 51^st meeting of the GST Council (Council) was held on 2 August 2023¹ and was chaired by the Union Finance and Corporate Affairs Minister Nirmala Sitharaman via video conferencing. This meeting was held as a f ollow-on discussion to clarify the government’s stance on the taxation of online gaming, horse racing and casinos, based on recommendations made in the 50^th Council meeting held on 11 July 2023². The meeting proposes to levy GST on online gaming and casinos on face value at the entry level, keeping the rate unchanged at 28% (as decided in the 50^th Council meeting). It is important to note that, in the 50^th Council meeting, it was proposed to levy GST at the rate of 28% on the full-face value of transactions (i.e. money pooled) in casinos, racecourses and online gaming, irrespective of whether the activity is a game of skill or chance.

In detail

Below is a summary of the Council’s recommendations.

Unified tax rate

• It is proposed to levy GST on casinos and online gaming at the entry level, keeping the highest rate of GST at 28%.

• The intention is to establish clarity on the tax treatment and equitable taxation.

Valuation of supplies

• Valuation of the supply of both online gaming and actionable claims in casinos is proposed to be done based on the amount paid or payable to or deposited with the supplier by the player and not on the total value of each bet placed. This implies that the value will exclude the amount entered into the games or bets f rom the winnings of the previous games or bets.

1 Press release on the 51^st Council meeting dated 2 August 2023

2 Press release dated 11 July 2023. You may click here refer to our Tax Insights dated 13 July 2023 on the 50^th Council meeting.

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2 PwC Tax Insights

Amendments to be introduced in the GST laws

• Entry 6 of Schedule III of the Central Goods and Services Tax Act, 2017, is to be amended to enable the levy of GST on online money gaming, casinos and horse racing.

• The Central Goods and Services Tax Rules, 2017, are proposed to be amended to insert specific provisions for the valuation of online gaming supplies and supplies of actionable claims in casinos.

• Amendments to be made in the respective notifications to specify the applicable rate of GST.

• Consequential amendments to be made by inserting and modifying various definitions, such as online money gaming, online gaming, virtual digital assets and supplier.

• Amendments are to be introduced in the GST laws to take due cognisance of the ban on online gaming in Tamil Nadu. This implies that the levy and collection of tax does not legalise online gaming in states where it has been banned.

• States are to also make corresponding amendments to the state GST laws.

Overseas online gaming platforms – Framework

• The Integrated Goods and Services Tax Act, 2017, is to be amended to provide for the liability to pay GST on the supply of online money gaming by a supplier located outside India (offshore gaming operator entity) to a person within India.

• Overseas suppliers are to obtain a single registration in India through the simplified registration scheme.

Non-compliance by overseas online gaming suppliers would result in blocking of public access to their sites.

Timeline for implementation

• The above changes are expected to be brought into effect from 1 October 2023.

Review by the Council in six months after implementation

• The Council will review the decisions six months after their implementation.

• However, the review will not necessitate amendment in the GST laws (except any changes to the rules or notif ications).

The takeaways

The 51^st Council meeting has proposed changes to foster clarity, fairness and effectiveness in the tax f ramework that benefits both the taxpayer and the overall economy. While the proposed changes are only recommendations, it is pertinent to analyse the fine print of the ensuing c irculars and notifications to understand their impact on businesses and other stakeholders. Levying heavy taxes on the fastest growing online gaming industry will add to its burden and discourage investment in Indian startups (from both within and outside India), which would negatively impact the startup ecosystem. Moreover, retrospective amendments would require the online gaming industry to gear up for a new set of litigation. Therefore, the outcome of the special leave petition f iled by the Revenue before the Supreme Court would be interesting to watch-out for.

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