28% GST for online gaming & casinos set to miss implementation target of 1st October as states yet to pass amendments

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The proposed 28% GST implementation for online gaming, casinos, and racecourses is all set to miss the stated deadline of 1st October for implementation. While the centre has passed relevant amendments to CGST Act and IGST Act and notified the relevant rules, the corresponding amendments by certain states are still pending.

As of 26 September, G2G could confirm that only 12 states / union territories have passed necessary amendments with 18 states where either the process is under progress or no information is available on the public domain.

The GST Council is scheduled to meet on October 7 and is likely to review the progress made by the states in incorporating changes with regard to taxation of online gaming in SGST laws as approved by the council in the last meeting in August. Finance minister Nirmala Sitharaman in August said the changes will be effective from 1st October.

GST contains two components namely SGST under the state GST laws and CGST / IGST under union laws. Uniformity is required with union and state laws to implement the proposed changes.

Without states passing the necessary amendments this could create an unique conundrum since the implementation of the GST regime in 2017. Incidentally, of the 18 states / UTs that are pending to pass necessary amendments, majority are the opposition ruled states. Uttar Pradesh is the only BJP ruled big state that is yet to pass the amendments.

However, Sanjay Agarwal, the chairman of the Central Board of Indirect Taxes and Customs (CBIC), as per reports expressed readiness to roll out the changes from 1st October and expected states to promulgate ordinances if passage of bills through legislatures is not possible.

The GST authorities have taken a view that the amendments are only clarificatory in nature and the GST since 2017 is 28% on the face value. The tax department recently obtained a stay on the order of Karnataka High Court in the GamesKraft matter and has started issuing notices to online gaming firms and Goa based casino operators.

Unicorn fantasy operator Dream11 has approached the Bombay High Court challenging the tax notice and the validity of certain provisions of the GST Laws.