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Reports: GoM likely to retain 28% GST rate on online gaming

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According to sources who spoke with Financial Express, a group of ministers (GoM) on racetracks, casinos, and online gambling will probably maintain the stand of a standard 28% GST on the full value of the consideration.

The Goa government had raised certain concerns regarding casinos during the GST Council meeting on June 29, and the federal body’s head, Nirmala Sitharaman, the finance minister, offered the GoM 15 more days to revisit the taxation issues. Due to differing viewpoints, the GoM has so far been unable to make any decisions.

In the first report released in June, the GoM had suggested that tax rate on online gaming should be 28% including contest entry fees, paid by the player for participation in such games. The current GST rate is 18% on platform fee and up to 20% of the contest entry fee. If the suggestion for a GST rate of 28% on online gaming activities gets approved the tax incidence in all online skill-based gaming activities will increase as a result.

The GoM also said that the tax rate of 28% should be levied on the face value of chips/token purchased from the casino by a player. After GST is levied on the purchase of chips or tokens, no further GST will apply to the value of bets made in each round of betting, including bets made with winnings from prior rounds.

An official said, “There will likely be one more meeting of the GoM, probably virtually, before it reports back to the Council.” Meanwhile, the GoM opted to seek legal advice at its most recent meeting in September over whether prize money from online gambling and horse racing falls under the category of “actionable claim.”

West Bengal and Uttar Pradesh state that the GST rate on online gaming, horse racing and casinos should be equal at a rate of 28% on the total value of the consideration without distinguishing between games of skill and chance.

The general consensus among Central government officials is that the question of whether gambling, horse racing, and online gaming are games of skill or chance should not be relevant under the GST regime, similar to how it is in the case of virtual digital assets (VDAs) for income tax treatment.

Even though there is ongoing discussion on whether to outlaw or regulate these private virtual currencies and assets, the Centre levied a 30% income tax on gains from VDA transactions in the FY23 Budget.

According to officials betting and gambling both have some similar elements and tax based on them being games of chance or skill will only prolong the matter. As long as people are betting money for winnings the tax on these activities should be similar.

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