GST Council Levies 28% GST On Online Gaming, Horse Racing, Casinos

Chandrima Bhattacharya, the state finance minister for West Bengal, stated that the council agreed to levy a 28 per cent GST on full value online gaming, horse racing, and casinos. According to the discussion at the 50th GST Council Meeting, the introduction of the 28 percent GST charge on online gaming will occur after amendments to GST law.

A higher GST rate of 28% on gross gaming revenue will have a negative impact on the burgeoning online gaming market, especially in the poker gaming sector. According to industry experts, a higher tax rate is likely to deter new players from playing online games like fantasy gaming, which will have an impact on the industry's growth. It will also put more financial strain on the online gaming industry, which may hurt operators' profit margins and raise players' expenses.

According to Maharashtra GST Council representative Sudhir Mungantiwar, Skill and chance will no longer be part of online gaming. The entry fee and any gains from any of the three categories-online gaming, casinos, and horse racing-will be subject to the 28 percent GST.

Ankur Gupta, Practice Leader (Indirect Tax), SW India said "Ignoring the long-time demand of the gaming industry, levying a 28% tax rate on the gaming industry will be a big setback for the Indian players. We will need to see the fine print of notification if any exceptions are created. We might immediately see notices being issued to the gaming players for differential tax and with this new series of litigation."

"With the advent of technology and the use of handheld devices, the online gaming market is fast growing at US$ 3 billion with more than 400 million users and is expected to grow rapidly in the next half a decade. Therefore, it was important to put taxability at par with global tax rates so that the Indian industry remains competitive. In most countries the online gaming industry is taxable more or less at par with the current taxability of 18%, therefore, it's a disadvantage for Indian game companies if the taxability moves to 28%. Even on the valuation, the taxability seems to be on the face value and not on margin / platform fee. Taxing the entire pool value will adversely impact the customers as well as they would get less playable value," further added Ankur Gupta.

Parag Mehta, Partner, N.A. Shah Associates said "GST of 28 % on the full value of gaming, horse racing and casino winnings will be a major damper to the gaming industry. The online gaming companies will be hit in a big way. Currently the same are classified as actionable claims and hence out of ambit. Amending the same will be a big blow for the gaming industry and will reduce the margins for all. It will surely be difficult for the gaming industry to grow if GST is levied at 28 %."

Sudipta Bhattacharjee, Partner, Khaitan & Co said "While the 28 % rate is detrimental to the online gaming industry, the chargeability on full value is what is going to hurt the gaming companies to an extent it may lead to its extinction. This is completely against the vision of the government to promote online gaming in India. The findings of the Karnataka High Court in Gameskraft with respect to the distinction between a game of skill and a game of chance has not been appreciated. It will need to be seen if the prescribed methodology to tax online gaming will pass the test of constitutionality. In any case this cannot be implemented retrospectively."

Aaditya Shah, COO, IndiaPlays(Online gaming platform) said "The implementation of a 28% tax rate will bring significant challenges to the gaming industry. This higher tax burden will impact companies' cash flows, limiting their ability to invest in innovation, research, and business expansion. There is a fine line between skill-based games and casinos/betting apps, and they must not be treated the same way; a levy of an 18% tax rate would have been helpful for the gaming industry. Introducing a 28% tax rate not only hampers online gaming platforms' capacity to develop new games and technologies but also undermines their competitiveness in the market. Moreover, the constrained financial resources hinder their ability to enter new markets and reach a wider customer base. It is now important for the industry to adapt and explore creative solutions to navigate these challenges while striving for sustained growth. By fostering an environment that encourages innovation, collaboration, and strategic resource allocation, we can address the hurdles posed by the tax rate and ensure the long-term success and prosperity of the gaming sector."

The key decisions reached at the Goods and Services Tax Council's 50th meeting in New Delhi were released on Tuesday. Council approves lowering the food and beverage GST. The new GST rate for cinemas would be 5% instead of the previous 18%. Currently, movie tickets costing less than Rs 100 are subject to a tax of 12%, while those costing more than that are subject to a GST of 18%.
Seven GST tribunals will be established in Maharashtra, while two tribunals will be established in West Bengal, according to a decision made at the GST Council meeting.