The much-awaited decision concerning the tax rate for online gaming, casinos and horse racing has been finalized. Online gaming will be taxed at the rate of 28% on full face value amount as decided by the GST Council during its milestone 50th meeting today. The new rate will be implemented after the GST law is amended.

Despite the various pleas by the online companies to levy GST on gross gaming revenue (GGR) the Council has decided otherwise. The same tax rate on full face value will also be levied on casinos and horse racing as announced by Finance Minister Nirmala Sitharaman in the press conference.

The FM clarified that there is no intention to destroy the online gaming industry. Extensive discussions were done during the meeting with suggestions ranging from imposing the lowest to the highest rates on the industry.

“The GST Council’s intention is not to hurt the online gaming industry or states with casinos. A few states shared their concerns. But there is a moral question: can we encourage them more than essential goods? So I am proud to say that the GST Council discussed and understood the matter deeply and took a decision which had been pending for 2-3 years. The issue is very complex,” said Sitharaman.

As a result, no distinction has been made between games of skill and games of chance. However, Maharashtra GST Council member Sudhir Mungantiwar insisted that the differentiation between the two should be made.

During the meeting, the Council took note of the report submitted by the Group of Ministers (GoM). The report was submitted in June 2022 but was given more time to revisit the final tax rate suggestion.

Following that, the report was again submitted by the GoM headed by Meghalaya Chief Minister Conrad Sangma. The report recommended a tax rate of 28% of the consideration, including the contest entry fee.

While most of the online gaming firms welcomed the 28% GST rate, they disapproved the tax on the amount including the entry fees and claimed that the decision was not in line with international practices and might end up harming smaller startups.

The decision regarding the GST was planned to be listed in the GST Council meeting in December 2022. Unfortunately, the discussion was postponed to the 49th meeting in February 2023, and further postponed for the 50th meeting this month. In between this, the Ministry of Electronics and Information Technology (MeitY) announced amendments to online gaming rules.