FM Sitharaman-led GST Council to meet today; clarify definition, 28% tax on online gaming

Finance Minister Nirmala Sitharaman-led Goods and Services Tax Council will meet on Wednesday. The council is expected to clarify the definition as well as the 28 per cent tax and how it will be levied on online gaming. 

The GST Council is expected to shed light on what would constitute online gaming for the purpose of taxing and whether games of skill or chance would be included in the definition. 

The council, helmed by FM Sitaraman, is slated to meet via video conferencing. 

In the previous meeting on July 11 the council had decided to levy a 28 per cent GST on online gaming, horse racing and casinos on full value. The government is also expected to introduce the amendments to the GST Act that is required to bring online gaming and horse racing as taxable actionable claims in the ongoing Monsoon Session of the Parliament. 

The online gaming industry has voiced its concerns regarding the 28 per cent taxation. Bimal Jain, Chairman of the Indirect Tax Committee, PHDCCI, stated that a clear distinction should have been made between online games, which are skill preponderant, and games that are in the nature of betting, wagering, and gambling, He added that levy of 18% could have been more reasonable as against 28% levy, for protection and growth of this industry including start-up in this sector.

Roma Priya, founder of Burgeon Law, a new-age legal firm focussed on the startup ecosystem, said that the 28 per cent tax on online gaming has eliminated the differentiation between games of skill and chance. “This goes against legal precedents and treats online skill gaming as equivalent to gambling. Furthermore, taxing the entire value of bets will negatively impact customers, as they will receive less playable value,” said Roma Priya, further adding that the taxation would impede the growth of the industry. 

Suman Bannerjee, CIO of US-based hedge fund Hedonova, said that the decision of levying 28 per cent tax on online gaming would have a negative impact on the industry.

Sanjay Chhabria, Director, Indirect Tax, Nexdigm said that while it is a positive development that the council has come forward to consider industry feedback on 28 per cent tax on online gaming. “While a rollback of the levy seems to be unlikely, it will be interesting to see if the Council will provide any relief to the India online gaming startup ecosystem,” said Chhabria. He said industry players should consider this as an opportunity to plead for reduced GST rate, distinction between games of skill and chance, and shift in valuation mechanism to prefer gross gaming revenue instead of value of bets.   

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