The Union Cabinet has approved the bill to amend the new GST rate of 28% on online gaming, casino and horse racing on Wednesday, August 9. With this, the bill will now be presented into the ongoing monsoon Parliament Session which will allow it to be enforced by the estimated date of October 1.

The most recent GST council meeting decided to levy 28% GST on full face value for aforementioned activities. Union Finance Minister Nirmala Sitharaman said that the new law will come in effect starting October 1, but can be delayed.

While the original council decision was announced earlier on July 11 during the 50th GST council meeting, the online gaming industry asked for more clarity on what method of GST will be levied. The industry also recommended a reconsideration on the matter claiming it will hamper their very existence.

The Union Revenue Secretary Sanjay Malhotra clarified that the decision to levy GST on full face value is final, and it will only apply to online real money games (RMG). However, the method of taxation on full face value was not clear.

Owing to this, another meeting was planned on August 2 where the GST council clarified that the tax will be levied on the initial deposit amount by the players. While this came as a slight relief, the online gaming industry still claims that the damage will be substantial.

28% GST decision a near unanimous one

Among the participating representatives, the state representative from Delhi insisted that the tax rate is harmful for the gaming industry and startups and should be relooked into completely. Furthermore, Goa and Sikkim also asked for GST on gross gaming revenue while keeping the tax rate at 28% as both states earn a significant portion of revenue from these casinos.

FM Nirmala Sitharaman, while acknowledging their words, said that since majority of the states currently want GST on full face value as taxing GGR will lower the tax on online games and wagering than some essential household items, so the decision of the council remains unchanged.

However, she reassured that the decision will be revisited again after six months of implementation in order to assess the adaptability of the situation.