The Ministry of Finance is considering making distinct categories in online gaming. The Ministry is contemplating classifying online games based on the role of skill and chance in winning.
In online games where scoring wins is akin to betting or gambling, the Goods and Services Tax (GST) rate would stand at 28 percent. On the other hand, games where winning depend on some amount of skill could be taxed at a lower 18 percent.
"All online games are not games of chance and are not in the nature of betting or gambling. The Finance Ministry will be presenting its view before the [GST] council," an official said, according to the report.
The GST Council will reach a final decision on the tax rate applicable to online gaming in its next meeting. This is likely to happen in May or June.
Differentiating between games of skill and chance would be a crucial task.
Report by Group of Ministers
A Group of Ministers (GoM) submitted a report on levying GST on online gaming to Finance Minister Nirmala Sitharaman in December last year. The GoM, chaired by Meghalaya Chief Minister Conrad Sangma, had agreed on a GST of 28 per cent on online gaming.
Still, there was no consensus on whether the tax should be levied on only the fees that portals charge or the full amount, including the bet money from participants. The GoM had decided to refer all suggestions to the GST Council for a final decision.
Charging 28 per cent GST on the total amount player deposits for a game, irrespective of categories, would lower the prize money and push players away from legitimate tax-deducting outlets, experts said. They added that it could also encourage gamers to unlawful outlets that do not deduct tax.
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