The central government today notified amendments to CGST Rules 2017 towards implementing the 28% tax rate for online gaming, casinos and horseracing. The rules will be effective on a date to be notified by the government which tentatively will be October 1, the proposed date of implementation of the new tax regime.
As deliberated by the GST Council on August 2, the CGST Rules considers the value of supplies as the amount deposited by a user, player. Interestingly, the rules don’t permit GST adjustment even when a player gets refund of initially deposited amount.
Apart from the central GST law amendments, States will also have to amend their GST laws for the new tax to kick in, before the tentative implementation deadline of October 1.
31B. Value of supply in case of online gaming including online money gaming.– Notwithstanding anything contained in this chapter, the value of supply of online gaming, including supply of actionable claims involved in online money gaming, shall be the total amount paid or payable to or deposited with the supplier by way of money or money’s worth, including virtual digital assets, by or on behalf of the player: Provided that any amount returned or refunded by the supplier to the player for any reasons whatsoever, including player not using the amount paid or deposited with the supplier for participating in any event, shall not be deductible from the value of supply of online money gaming.
31C. Value of supply of actionable claims in case of casino.– Notwithstanding anything contained in this chapter, the value of supply of actionable claims in casino shall be the total amount paid or payable by or on behalf of the player for – (i) (ii) purchase of the tokens, chips, coins or tickets, by whatever name called, for use in casino; or participating in any event, including game, scheme, competition or any other activity or process, in the casino, in cases where the token, chips, coins or tickets, by whatever name called, are not required: Provided that any amount returned or refunded by the casino to the player on return of token, coins, chips, or tickets, as the case may be, or otherwise, shall not be deductible from the value of the supply of actionable claims in casino.
Explanation.- For the purpose of rule 31B and rule 31C, any amount received by the player by winning any event, including game, scheme, competition or any other activity or process, which is used for playing by the said player in a further event without withdrawing, shall not be considered as the amount paid to or deposited with the supplier by or on behalf of the said player.”
While the changes will not be retrospective per se, the revenue secretary last month stated that the present amendments are more in the nature of a clarification because betting, gambling and lottery are already included as actionable activities under the GST law and are liable to 28% tax.
Today, the Supreme Court stayed the operation of the Karnataka High Court decision quashing a ₹21,000 crore tax demand against Gameskraft Technologies. The stay would pave for the tax department to examine operations of nearly 35 gaming companies and issue tax demands.
Another key amendment in the proposed tax regime is the mandatory registration of offshore gaming companies. A monitoring cell under the Directorate General of GST Intelligence (DGGI) will keep an eye on these companies to check if they are operating without paying taxes.
As collateral impact of the new tax regime, few real money gaming startups including Quizy have announced exit from the business while unicorn MPL had cut down employee numbers. Similarly, Spartan Poker had let employees leave in anticipation of low revenues.