GST Council meet: GST relief for Indian online gaming in the offing

GST Council meet: In a sign of potential relief for India’s online gaming industry, the union Finance Ministry has proposed an amendment to the Central Goods and Services Tax (CGST) Act, 2017 via the introduction of a new Section 11A in the legislation.

This proposed section empowers the central government to “not recover the GST not levied or short-levied as a result of general practice”.

The proposal is part of the agenda for the upcoming meeting of the federal GST Council that is scheduled to be held on June 22 in New Delhi.

If accepted, the amendment could pave the way for not recovering 28 per cent GST on e-gaming, casinos and horse racing. Industry players have raised concerns over the ambiguous nature of last years’ decision to levy this rate of GST on the sector.

This new provision could offer a safety net by legitimising past practices where GST was not fully applied, thereby preventing retrospective tax demands that could financially cripple e-gaming companies.

"The Law Committee recommended that a provision may be incorporated in GST laws empowering the central and state governments to regularize, on the basis of the recommendations of the GST Council, non –levy or short levy of GST or Compensation Cess where it is found that such non levy or short levy was a result of general practice in the trade or a section of trade. Law Committee also recommended that no refund of GST or Compensation Cess may be allowed on account of any notification issued in this regard”, the proposal states.

While the amendment might stabilise the industry by regularising past practices, it offers no relief for overpaid taxes, as companies cannot claim refunds for any excess GST paid due to these practices. However, it could reduce legal disputes and enhance clarity in tax compliance moving forward.

The council will decide on this recommendation from the Law Committee at the forthcoming meeting and may also decide how to treat the demand notices sent of around Rs. 1.5 lakh crore to 80 online gaming companies in India.

The 52nd GST Council, at its October 2023 meeting, had decided to impose a 28 per cent GST on the initial bet amount, with a pending six-month review to be revisited in the upcoming meeting. However, sources indicate that the government remains firm on the current taxation approach on online gaming, citing regulatory benefits and a significant increase in tax revenue since the GST's introduction.

Goods and services tax collections from online gaming have risen by as much as 400 per cent, to an average of Rs 1,200 crore a month, since the new regime took effect on October 1, 2023.