GST Council to Convene on 2nd Aug to Debate Online Gaming Tax Laws

It appears that the GST Council in India is likely to hold an unscheduled meeting on August 2 to address the issue of tax treatment on real-money games played on online gaming platforms. The decision to impose a 28 percent tax on the face value of real-money games has caused concern among online gaming companies.

Currently, online gaming platforms pay an 18 percent GST on the platform fees, which is based on the Gross Gaming Revenue (GGR), rather than on the full value of the transaction, known as the Contest Entry Amount (CEA). The recent decision to levy a 28 percent tax on the full value of the money paid by users to play these games has raised objections from the Internet and Mobile Association of India (IAMAI). They argue that this move would result in a significant increase in GST on the industry, leading to potential damage to the Indian online gaming startup ecosystem and discouraging foreign direct investments (FDI).

Despite representations made by online gaming companies to the finance ministry seeking a review of the decision, it is unlikely that there will be a roll-back of the tax change. The upcoming GST Council meeting on August 2 is expected to focus on providing clarity on the legal amendments required for the tax treatment of online gaming. The discussion will be centered around the provisions of the Central GST Act's schedule 3, which defines and taxes lottery, betting, and gambling under the GST.

Revenue Secretary Sanjay Malhotra, in an interview, emphasized that tax authorities need to follow the principle of equity. Therefore, if online gaming is treated as betting or gambling, and if betting, gambling, and lottery are taxed at 28 percent, then online gaming should be treated the same way.

The meeting's agenda will not include reconsidering the decision to impose the 28 percent tax; instead, it will focus on bringing clarificatory amendments to make the taxation of online gaming more explicit. The authorities aim to address the taxation issue based on the principle of playing for stakes and the outcome, irrespective of the nature of the game.