28% GST Recommended on Online Gaming, Casinos, and Horse Racing in India- Implications for Businesses ( July 12, 2023 )
During its 50th meeting on July 11, India’s GST Council made a significant decision to impose a uniform 28 percent goods and services tax (GST) on the full face value of online gaming, casinos, and horse racing. To implement this decision, the government is expected to introduce a legal amendment during the monsoon session of Parliament. This amendment will include online gaming and horse racing as actionable claims, allowing for their taxation without differentiating between games of skill or chance.
While the government insists that this decision is not intended to harm any industry, online gaming companies have expressed concerns about the potential impact on their businesses. They fear that this move could adversely affect their volumes and ultimately threaten the viability of their companies.
During its 50th meeting on July 11, 2023, India’s GST Council made a significant decision regarding the taxation of online gaming, casinos, and horse racing. A uniform tax rate of 28 percent will be applied to the face value of chips purchased in casinos, the full value of bets placed with bookmakers or totalizators in horse racing, and the full value of bets placed in online gaming. The alternative option of levying tax on gross gaming revenue or platform fees was considered but was not favored by the ministerial panel.
To implement this decision, the government will introduce amendments to the GST-related laws. These amendments will include online gaming and horse racing in Schedule III as taxable actionable claims. Previously, only lottery, betting, and gambling were classified as actionable claims.
The decision to apply a uniform tax on gaming and gambling platforms impacts a wide range of companies operating in the online gaming industry . This decision affects not only gambling platforms but also gaming companies that have made significant efforts to differentiate themselves by emphasizing games of skill rather than games of chance. These companies have invested time and resources in lobbying for a clear distinction between skill-based games and gambling activities.
It’s worth noting that the online gaming industry stands out as one of the few segments within the internet economy that comprises multiple highly profitable companies. Thus, the impact of this decision on the online gaming sector is significant, potentially affecting the profitability and operations of these companies.
India’s Federal Finance Minister Nirmala Sitharaman, who heads the GST Council, emphasized that the objective is not to hinder any industry but to ensure that all businesses operate within a fair taxation framework.