Currently, online games attract 18% GST. The tax is levied on gross gaming revenue, i.e. the fees charged by online gaming portals.
A final decision on the taxation of online games would be taken by the GST Council at its next meeting, which will probably take place in May or June.
The Department of Finance is considering classifying online gambling into categories of skill and luck, and levying a differential rate of GST, an official said. Online games where the win depends on a certain outcome or are in the nature of betting or gambling would be subject to a 28% Goods and Services Tax (GST), while those involving a certain competence could be taxed at a lower rate of 18%.
A final decision on online gambling taxation would be made by the GST Board at its next meeting, which will likely take place in May or June.
“Not all online games are games of chance and are not in the nature of betting or gambling. The Ministry of Finance will present its views to the council,” the official told reporters here .
It would be a matter of making the difference between what should be a game of skill and what can be called a game of chance.
Currently, online games attract 18% GST. The tax is levied on gross gaming revenue, i.e. the fees charged by online gaming portals.
A group of ministers, chaired by Chief Minister of Meghalaya, Conrad Sangma, submitted a report on GST on online gambling to Finance Minister Nirmala Sitharaman last December.
The GoM had agreed to a 28% GST on online gambling. However, in the absence of consensus on whether the tax should be levied solely on the fee charged by the portal or on all consideration, including the bet amount, received from participants, the GoM had decided to refer all suggestions to the GST Council for a final decision.
Imposing 28% GST on the total amount a player deposits for play in both online gaming categories would reduce the prize money remaining for distribution and drive players away from legitimate tax deduction portals. It may also encourage online gamblers to illegal portals that do not deduct taxes, industry experts have said.
Online gaming has seen a surge during the Covid lockdown, with the number of users in India increasing dramatically. According to a report by KPMG, the online gaming sector will reach Rs 29,000 crore by 2024-2025, up from Rs 13,600 crore in 2021.
The contentious issue of the collection of Goods and Services Tax (GST) on online gambling has been pending for almost two years now, with many states offering a lower tax rate on online gambling that requires a skill. They are of the opinion that games of skill should not be equated with games of chance.
The lack of a clear definition often leads to tax notices being sent to online gambling portals and subsequent litigation.
The Group of Ministers, in its previous report submitted to the Council in June 2022, suggested a GST of 28% on the total value of the consideration, including the competition entry fee, paid by the player, without making a distinction , such as games of skill or chance. However, the Council had asked the GoM to reconsider its report.
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(This story has not been edited by News18 staff and is published from a syndicated news agency feed)
