GST Council Holds Firm on 28% Tax for Online Gaming, Casinos, and Horse Racing; Implementation Scheduled for October 1

New Delhi, August 2, 2023 – In a significant development, the 51st meeting of the Goods and Services Tax (GST) Council, presided over by Union Finance Minister Nirmala Sitharaman, has upheld the decision to impose a 28% tax on online gaming, casinos, and horse racing. The Council convened on Wednesday and extensively deliberated the intricacies of enforcing this taxation while addressing concerns raised by various states and industry stakeholders.

The decision, which follows three years of deliberation, has been met with both support and reservations from different regions of the country. Union Finance Minister Sitharaman elucidated that the GST Council engaged in thorough discussions to shape the language of necessary amendments required to facilitate the taxation of online gaming. While states like Delhi, Goa, and Sikkim advocated for a review of the tax proposition on online gaming, Tamil Nadu expressed reservations due to its existing ban on such games. Conversely, Maharashtra, Gujarat, Chhattisgarh, West Bengal, Bihar, and others rallied behind the imposition of the 28% tax, urging its swift implementation.

The levy will be imposed on the value of the supply of online gaming and actionable claims in casinos, with the assessment rooted in the entry-level parameters. Notably, the Council explored the scenario of taxing 28% on the gross gaming revenue (GGR), leading to a net revenue of approximately 11-12%. This contrasts with the existing 18% GGR, yielding a net revenue of 8-9%.

The latest decision by the GST Council has triggered mixed reactions from industry representatives. The Federation of Indian Fantasy Sports (FIFS) and E-Gaming Federation (EGF), representing 50 Indian online gaming companies, expressed appreciation for the government’s effort to address the industry’s concerns about repeated taxation. However, they cautioned that the new tax framework could result in a substantial 350% increase in GST, potentially hindering the Indian online gaming sector’s progress. Despite this, FIFS and EGF acknowledged the framework’s potential to spur innovation and regeneration within the gaming landscape.

This development follows the Council’s previous meeting in July, during which it endorsed a 28% tax on the full face value of bets in online gaming, casinos, and horse racing. The gaming industry vehemently opposed this decision, with the All India Gaming Federation (AIGF) denouncing it as unconstitutional, irrational, and egregious.

The rapid succession of Council meetings underscores the urgency of clarifying the supply value in online gaming and casinos for the 28% tax imposition. The Council’s recommendations encompass amendments to the CGST Act 2017 and IGST Act 2017, including modifications to Schedule III of the CGST Act to provide clarity on the taxation of supplies in casinos, horse racing, and online gaming.

Moreover, the Council proposed an addition to the IGST Act to outline the GST liability for the supply of online money gaming by international suppliers to Indian consumers. It further delineated that the valuation of online gaming and actionable claims in casinos would be based on the amount paid or payable to the supplier, excluding previous game winnings. To accommodate these changes, amendments to the CGST Rules 2017 are being pursued.

The GST Council is actively working to expedite the process of enacting these amendments, with the aim of implementing them from October 1, 2023. The virtual Council meeting witnessed the participation of Union Minister of State for Finance Pankaj Chaudhary, along with finance ministers from states and union territories (with legislative bodies), as well as senior officials from both the central and state governments.

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