GST Council likely to tax virtual digital asset-based transactions on online gaming platforms, casinos

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With Web3 and blockchain gaming rising in the online real money gaming space, deposits and payouts in digital currency like NFTs and in-game items called virtual digital assets (VDAs) are common. The upcoming GST Council meeting on August 2 is likely to address the situation and bring VDAs under the GST law as they can be sold or traded for real currency.

Notably, this will be applicable for online games in which players put money and have expectations of winning in the form of digital assets. Several online gaming companies provide rewards in the form of digital assets instead of traditional currency. As per reports, the tax may be levied according to the current price of the digital asset. This will bring even the overseas online gaming companies under the GST law.

Apart from online games, casinos that also deal in virtual currencies will also be covered. “Considering now we have our own CBDC (central bank digital currency), it is important to include it in definition,” an official said as quoted by The Economic Times.

Earlier this month, the GST Council had announced that 28% tax will be levied on full face value amount on online gaming, casinos and horse racing. However, it wasn’t revealed if the tax would be levied on the initial deposit or every contest entry amount.

Since the Council had not deliberated, the upcoming meeting aims to decide on it. Regardless of how the tax is levied, the online gaming industry claims the tax rate will be detrimental for them, especially emerging startups. They believe that several gaming firms will be wiped out and the ones that will survive will be put under heavy tax burden, pushing users towards illegal betting platforms.