The GST council will hold an online meeting via videoconferencing on Wednesday, August 2. The meeting will be held in order to discuss and take final call on how GST will be levied on online gaming, casinos and horse racing. The meeting is much sought after by the gaming industry to obtain clarity regarding the method of taxation.
The Revenue Secretary Sanjay Malhotra has said that the council does not intend to change the tax on full face value. However, he added that decision regarding the tax to be applied on the initial amount or every bet made by the user is to be taken.
An official talking to The Indian Express also said, “There is no revision in the proposal. The amendment in GST law and rules as per decision taken by Council in the previous meeting will be put up to Council for approval. The earlier decision was only in principle.”
The GST council, on July 11, announced the new tax rate for online gaming, casinos and horse racing. The tax was decided at 28% on the full face value, while the online gaming firms were expecting the tax on gross gaming revenue (GGR).
This made the online gaming firms go offensive against the revised tax rules. Several gaming firms called it the end of online gaming sector in India. Industry stakeholders claimed that the tax burden will force startups to shut down, ultimately leading to even lower tax revenue to the government. Additionally, some opined that in worst case scenario, players will start using illegal platforms.
It is surprising that the GST Council is going to conduct an emergency meeting by video conference on 2nd August to discuss the modalities of implementation of 28% GST on online gaming, casinos & horse racing. Few points:
– For convening a regular meeting, as per Regulation 3 of… https://t.co/TOJwBST2xP
— Jay Sayta (@jnsayta) July 26, 2023
RMG platforms different from video games, esports platforms
Clearing the air on the tax ending online gaming sector, Malhotra clarified that the tax will be levied on the real money gaming (RMG) platforms, which is a part of the gaming sector. The video game and esports industry remains unaffected and will pay only 18% GST as the games are usually one-time purchase or free-to-play (FTP) that are played for entertainment and recreational purposes.
While the numbers from various reports suggests that RMG sector generates the largest revenue, Malhotra revealed that the government collected Rs 1,700 crore in tax last year which was only around 2% of the total turnover.
Minister of State for Information and Technology, Rajeev Chandrasekhar said that once MeitY forms the framework for online gaming regulation, they will work with GST council for a solution on the matter.