LEVY OF GST ON ONLINE GAMING

[Dr. Sanjiv Agarwal]

Indian online gaming industry is today one of the big players globally. The industry has grown rapidly in recent years and is considered as one of the highly rewarding sector for players as well as employees. It is also going to be a significant contributor to the exchequer (may be over Rs. 1.5 trillion).

It is a reality now. Right from the consideration of taxation on online gaming to its implementation, it all happened in less than 100 days.

Online games of skill or chance, horse races, casinos and the like- all are exigible to levy of Goods and Services Tax (GST) in India now, i.e., w.e.f. 01.10.2023 though some states are yet to legislate the provisions in this regard. However, Central Government has already carried out necessary amendments in CGST Act, 2017 and IGST Act, 2017 which have since been notified to come into force w.e.f. 1^st October, 2023 @ 28 percent, the highest prescribed rate of GST in India.

CBIC has since notified the effective date of levy of GST on online gaming on 29 September, 2023. These notifications are in relation to effective date, rate of tax @ 28%, registration by global online gaming platforms and place of supply for levy of IGST. It has also been notified that such games will be covered as specified actionable claims. Valuation norms have also been prescribed and CGST Rules have been amended to this effect. GST shall be on the total amount paid or payable to or deposited with the supplier.

Notified date for CGST (Amendment) Act, 2023

• Amendments made vide CGST (Amendment) Act, 2023 in relation to online gaming / casino have been notified to become effective w.e.f. 01.10.2023.
• These relate to levy of GST on specified actionable claims (online gaming / casino) and place of supply made to unregistered persons.
• The corresponding amendments have also been made in IGST Act, 2023 which will also be effective from 01.10.2023.

(Source: Notification No. 48/2023-Central Tax dated 29.09.2023)

Value of specified supplies

• CBIC has notified the following supplies under section 15(5) for the purpose of valuation of taxable supplies:

 (i) supply of online money gaming;

(ii) supply of online gaming, other than online money gaming; and

(iii) supply of actionable claims in casinos.

• Valuation shall be determined in the prescribed manner, i.e. as per rules.
• This shall come into force w.e.f. 01.10.2023.

(Source: Notification No. 49/2023-Central Tax dated 29.09.2023)

Time of supply of online gaming services

• Notification No. 66/2017-CT dated 15.11.2017 has been amended to provide for time of supply for online gaming etc.
• It has been provided that the time of supply for specified actionable claims such as online money gaming would be earlier of date of issue of invoice or date on which supplier receives payment.
• This shall be effective w.e.f. 01.10.2023.

(Source: Notification No. 50/2023-Central Tax dated 29.09.2023)

Amendment in CGST Rules, 2017

• CBIC has notified further amendment in CGST Rules, 2017 to provide that :
  • Valuation of supply of online gaming, online money gaming and actionable claims in casino will be determined in a notified manner.
  • Rule 31B and Rule 31C have been inserted under the CGST Rules to provide the manner of determining the value of supply of online gaming (including online money gaming) and supply of actionable claims in casino respectively.
  • The said rules were earlier inserted vide Notification No. 45/2023-Central Tax, dated 06-09-2023. However, the said notification has now been superseded vide Notification No. 51/2023-Central Tax, dated 29-09-2023.
• This shall come into effective from 01.10.2023.

(Source: Notification No. 51/2023-Central Tax dated 29.09.2023)

GST rate on online gaming & casinos

• ‘Specified actionable claims’ under Section 2(102A) of the CGST Act, 2017 would be leviable to GST at the rate of 28% with effect from 01-10-2023.
• This includes the supply of actionable claims involved in or by way of betting, casinos, gambling, horse racing, lottery, and online money gaming.
• This shall come into force w.e.f. 01.10.2023.

(Source: Notification No. 11/2023-Central Tax (Rate) dated 29.09.2023)

Further, such companies have been served with show cause notices demanding GST. However, these shall be challenged in courts. According to CBIC, such demands are in accordance with law and its uniform interpretation. This may be reviewed after six months.

Post levy of GST on online games, there are news relating to layoffs and job seekers leaving this sector. The new hiring has been put on hold and investors are also on back foot. It is considered as a retrogatory move impacting present business, profit, liquidity, employment and so on. There is a sense of uncertainty amongst risk investors too.