Centre notifies 28% GST on online money gaming, casinos from October 1

Online gaming companies are gearing up for the 28% goods and services tax from October 1, but there remains uncertainty on the implementation of the tax as some states are yet to pass legislation or promulgate an ordinance for the same.

States including Karnataka and Maharashtra have promulgated ordinances for levying the tax. But around a dozen states are yet to have any legislation or Ordinance for this but according to sources, a number of states are in the process of promulgating an Ordinance, which may be done by the day's end.  

The Central Board of Indirect Taxes and Customs has notified the effective date for the levy of 28% Central and Integrated GST on online money gaming and casinos from October 1. It has also notified the rules for registration of overseas companies for the purpose of GST.

“Online money gaming companies must register for GST and file monthly returns, as per the recent amendments made to the GST law. The GST registration process is simple and can be completed online. Once registered, companies will need to align their accounting systems to comply with the new requirements,” said Saurabh Agarwal, Tax partner, EY, adding that these firms will also need to create a data repository to store customer information and other data required for undertaking GST compliances in India for a specified period of time.  

It is important for online money gaming companies to comply with the new GST regulations in order to avoid any penalties in the future, he further noted.

However, firms are awaiting clarity from the GST Council meeting on October 7 to understand how the tax will be implemented as many states are yet to notify the tax.

“This is a unique situation where the Centre has notified a tax from a particular date but a number of states are yet to pass a legislation or promulgate an ordinance for the same. It appears that more clarity will come on the implementation of the 28% GST on online gaming after the GST Council meeting on October 7. The tax may have to be levied retrospectively,” said Prateek Bansal, Partner, White and Brief - Advocates & Solicitors

Sudipta Bhattacharjee, Partner, Indirect Taxes, Khaitan & Co said the implementation of the CGST and IGST amendments from October 1 this year despite corresponding State GST law amendments not being in place appears to be a move to push the States to pass their respective amendments at the earliest and till that happens, there will clearly be an anomaly. 

"To illustrate – Haryana has amended their SGST laws but Delhi has not. Operators with registration in Delhi will technically not be liable to SGST but will be liable to CGST for deposits from players/users located in Delhi. However, IGST will be applicable for all deposits from customers located outside Delhi. Whereas operators in Haryana will have to charge full tax rate for all customer deposits/ purchase of chips irrespective of whether their users/players are within or outside Haryana," he said, adding that there is no precedent for this in the Indian Constitutional history and it is completely violative of the Supreme Court judgment in Mohit Minerals.

Sudipta is representing Gameskraft in the Supreme Court on the ongoing Rs 21,000 crore GST matter and several other gaming companies across various High Courts.

Practically, to be on the safe side, gaming companies in States like Delhi may still collect the State GST portions from their users from October 1 and keep it separately to be deposited at a later date.

Certain industry associations have also written to the Revenue authorities for reconsideration on this matter.