Online gaming businesses to now pay 28% GST under new rules

Despite fierce resistance from the stakeholders, Parliament has passed the amendments to impose 28 percent GST on online gaming, casinos, and horse race clubs.

The Central Goods and Services Tax (Amendment) Bill, 2023, and The Integrated Goods and Services Tax (Amendment) Bill, 2023 were first passed in the Rajya Sabha and then in the Lok Sabha on the last day of the monsoon session.

Apart from domestic, the rules will be applied to both players and online gaming platforms located outside the country. And if the platforms fail to follow registration and tax payment provisions, they may be blocked, as per the new provision.

The amendments include defining online gaming, online money gaming, specified actionable claims, and virtual digital assets.

Now, with the amendments, horse racing, casinos, and online money gaming will be treated as actionable claims just like lottery, betting, and gambling. And this tax will be for both skill and chance-based games.

According to the current Schedule III of the Act, only lotteries, betting, and gambling are “specified actionable claims” but this will be amended to provide clarity regarding the taxability of actionable claims involved in or by way of casinos, horse racing, and online gaming, the Bill’s said.

Tax on online gaming has been a topic of discussion for a long time. Last month, on July 11, the GST Council decided to bring online gaming, horse racing, and casinos under the 28% GST slab.

Last week, on August 2, these amendments were approved by the GST Council and this week the Union Cabinet gave its nod to them.

The online gaming industry has resisted the move. Representatives from the industry have demanded the finance ministry and the Centre to roll back the high tax imposed on the sector. Even Indian companies have also said that this move will adversely impact them.

Interestingly, the bills were cleared without discussion in Lok Sabha while the Rajya Sabha returned the Bill to the lower house. Now, states will have to change their respective GST Acts for the new rules to kick in.

The government is aiming to bring the law on the ground by October 1. Further, it has been assured that the 28% GST will be reviewed six months after implementation. Even before it is implemented, it is creating anxiety in the industry with some online gaming firms already planning lay-offs or closures.

Gaming platform Mobile Premier League is said to have let go of 350 employees to “survive” the 28% GST.