India: 28% tax on casinos, online gaming likely to go into effect from October 1; review after six months

Indian Union Finance Minister Nirmala Sitharaman on Wednesday said that the 28% Goods and Services Tax (GST) on full face value for online gaming, casinos, and horse racing is likely to be implemented from October 1. The GST council has now finalized the modalities for the determination of supply value in online gaming and casinos for levying the tax.

Speaking at a press conference, Sitharaman said: “Minister representing Delhi wanted the decision of 28% GST on online gaming (on face value) to be reviewed. Goa and Sikkim also shared that the decision hurt their revenues. Goa appealed that the tax should be imposed on Gross gaming revenue (GGR) and not face value. Sikkim requested for a re-consideration on casinos.”

Sitharaman explained that the GST Council has agreed “to come back with a position review after six months from October 1, 2023.” She further stated that the actionable claims in casinos may be done based on the amount paid or payable to/deposited with the supplier excluding the amount entered into games/bets or the total value (bet plus profit). GST will be levied 28% at the entry-level (amount deposited with the online platform), and not on every bet or winnings.

At a virtual meeting, chaired by Sitharaman, GST Council members approved the changes proposed in the GST law. The Federation of Indian Fantasy Sports (FIFS) and E-Gaming Federation (EGF) spoke about the decision, which was taken at the 51st GST Council meeting: “FIFS & EGF, which represent 50 Indian online gaming companies, appreciate the government addressing the industry’s concerns on the issue of repeat taxation.

“The new tax framework, while clarifying and resolving uncertainty, will lead to a very burdensome 350% increase in GST and set the Indian online gaming industry back several years. However, it will allow gaming companies a fighting chance to innovate and rebuild the foundation of gaming in India.”

Government sources say 28% tax is here to stay

Shortly after the decision was made by the GST Council in July, over 100 gaming companies spoke against it. However, government officials have now reiterated that the proposed 28 percent GST on online gaming and casinos is here to stay.

Speaking to the Times of India, government sources said that levying the tax on the gross value “is the way ahead since using any other method leaves the scope for complications in businesses that lack transparency.” Sources also told the publication that the decision was well-thought and unanimous with all states and the center on the same page. The GST Council comprises finance ministers of all Indian states along with the union finance minister and makes the final decisions on rules regarding GST.

Talking about the imposed GST, a government official was quoted by the publication as saying: “Do you want us to deploy an inspector at every table to calculate the earnings of an individual in a casino or see how much cold drink is being consumed at what price? Just like casinos, online gaming is also an opaque business where it is very difficult to break up things and undertake the calculations.”

The sources also spoke about the nature of the online business, saying that the ‘sin goods’ should be heavily taxed as young children are prone to getting into these games and spending a lot of money. They also said that the government will make “no distinction” between a game of skill and a game of chance, so long as money is involved in a game.