Karnataka cabinet delays draft ordinance for levying 28% GST on online gaming

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In its cabinet meeting on September 7, the Karnataka government postponed the approval of a draft ordinance to impose the new 28% GST rate on online real money games, casinos and horse racing.

The approval is now expected to be given in the next cabinet meeting. According to Moneycontrol, the finance department had presented the draft ordinance but it has been sent to the law department for review. It has also been reported that a provisional approval has been given to the current form of the ordinance.

Karnataka was already divided over the new 28% GST rate on full face value as Information Technology and Bio Technology minister Priyank Kharge called it a catastrophe for the online real money gaming industry.

The conflict emerged after the GST Council, with a near consensus, decided to keep the GST rate at 28% on full face value for online gaming in its August 2 meeting. The Council treated games of skill and games of chance at par which sparked a debate among the stakeholders.

Kharge also stated that the GST Council decision will hinder India’s ambition to become a US$ 1 trillion digital economy by 2025. While he is against betting and gambling, rounding up games of skill in the same category will only bring harm to the industry he said.

Finance Minister Nirmala Sitharaman, however, reassured the online gaming firms that the decision will be reviewed after six months from implementation. The new GST rules are slated to be implemented from October 1, 2023.

This, however, did not change the fact that startups will stay afloat as some real money gaming platforms have halted their operations even before the new GST policy is levied. Moreover, a major player, MPL, has decided to lay off half of its workforce.

The issues do not end here for the industry as the Supreme Court recently issued a stay order on the Karnataka High Court’s ruling which quashed the Rs 21,000 crore GST notice served to Gameskraft. With this, the department can now conduct proceedings in the Gameskraft matter and on similar online gaming platforms.