Group of ministers likely to propose 18% GST for games of skill, 28% for chance

The Meghalaya chief minister Conrad Sangma headed GoM may recommend the highest 28% GST on betting, casinos and horse racing, differentiating between games of skill and games of chance.

The GoM is expected to freeze its recommendations only after the introduction of the IT Intermediary Amendment Rules 2023. The final decision will be taken by the GST council in its next meeting, likely in May last week or June first week.

Online gaming, which does not involve betting, currently attracts an 18% GST on the gross gaming revenue.

The GoM in its earlier report submitted to the council recommended 28% GST on GGR on online gaming, irrespective of whether it was a game of chance or skill.

The change in stance follows the Finance Act, 2023, which has recognised the online gaming industry as a new-age industry, distinguishing it from gambling and betting. It also made separate provisions for the taxation of winnings from online gaming.

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“There has been significant development since the report was submitted so there will be a relook at the recommendation,” a person aware of the development told ET. The GoM may also recommend one more round of consultation with the industry stakeholders, and GST officials. The Centre last week notified rules for online gaming under IT Act, 2000 proposing self-regulatory entities (SROs) to allow permissible online real money games.

Games involving real money will need to comply with KYC norms as per the rules. The Finance Act 2023 imposed a 30% tax deducted at source (TDS) on ‘net winnings’ from online games in the ‘user account’ at the end of the concerned financial year, the onus of which will be on the gaming company.

The rules are effective from April 1. The TDS will be doubled in case of non-compliance in return filing by the concerned deductee where the TDS amount in the past year was more than ₹50,000.

“The intention of the legislature in levying tax on “net winnings during a previous year” suggests that the net amount from the activity of playing online game is sought to be taxed and not the gross prize money,” Asish Philip, Partner, Lakshmikumaran & Sridharan Attorneys said.

“The GST Council can take a leaf out of the proposal for introducing a separate regime for online platforms offering games of skill,” Philip added.

The industry has welcomed the TDS provision and sought similar clarity in the case of GST also.

“In light of the new MeitY (Ministry of Electronics and Information Technology) rules for online games and the developments in the context of TDS being in support of the industry, we are hopeful for similar clarity in the context of GST as well,” Roland Landers, CEO, All India Gaming Federation (AIGF) said.

Currently, the online gaming industry is facing about ₹28,000 crore GST demand.