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New gaming tax: 28% collection on full bets offshore platforms require GST registration from Oct 1st

Introduction

With the implementation of a new gaming tax, the Indian gaming industry is going through a substantial upheaval. Beginning on October 1st, internet gaming businesses will have to add a 28% Goods and Services Tax (GST) on all wagers. Additionally, in order to operate in India, offshore platforms must register for GST. This action is a result of revised regulations for the Central GST and Integrated GST. The lack of consistency in State GST (SGST) rules across different states has alarmed the e-gaming business and offshore platforms, despite the fact that the new tax is intended to regulate the industry and generate revenue.

 

New Gaming Tax: Implications and Changes

Under the revised provisions of the Central GST Act, online gaming, casinos, and horse racing will now be classified as "actionable claims" similar to lottery, betting, and gambling. As a result, these activities will be subject to a 28% GST on the entire face value of bets. Offshore online gambling platforms will also be required to register in India and comply with local law by paying the 28% tax. Failure to comply with the registration and tax payment requirements may result in restrictions on access to online gambling platforms with foreign locations.

Concerns and Uncertainty

While the GST Council has adopted changes to the law, there is still uncertainty surrounding the implementation of the new gaming tax. Many states have not yet passed adjustments to their respective SGST laws, which could lead to confusion and challenges for online gaming companies registered in those states. The All India Gaming Federation (AIGF) has raised concerns about the lack of clarity and has requested necessary clarifications from the government to address these issues.

Compliance and Preparation

To avoid future fines and ensure compliance with the new GST legislation, online gambling enterprises need to adapt their processes and technology. It is crucial for these companies to understand the revised taxability conditions, including the classification of supplies, timing of supply, and transition arrangements. While the majority of the conditions have been communicated, there are still areas of uncertainty that need to be addressed.

Transition Period and Government Support

The industry is hoping that the government will provide an appropriate amount of time for the transition to the new tax regime. The AIGF representative emphasizes the need for the government to be aware of the situation and provide necessary support and clarifications to ensure a smooth transition. It is important for the government to consider the challenges faced by online gaming companies in states where the SGST laws have not been amended.

Evaluation and Show Cause Notices

After six months, the new gaming tax's implementation will be reviewed. The impact and efficacy of the tax system will be evaluated in this review. In the interim, show-cause letters for alleged underpayment of taxes have been sent to a number of online gaming enterprises. The tax positions of many businesses, notably Dream 11 and Delta Corp, have been questioned. To avoid fines and other repercussions, online gambling operators must adhere to the new GST regulations.

Conclusion

The online gambling sector has seen a huge upheaval as a result of India's new gaming tax. Businesses will need to modify their procedures in order to comply with the new tax law, which imposes a 28% GST on the total amount of wagers. To operate in India, offshore platforms will also need to register for GST. The updated requirements must be understood and followed by online gaming enterprises despite the worries and uncertainty that surround the application of the new tax. The industry's ability to smoothly transition to the new tax system will depend on the government's assistance and clarification on a number of problems.

 

 

 

author

The Tax Heaven

Mr.Vishwas Agarwal✍📊, a seasoned Chartered Accountant 📈💼 and the co-founder & CEO of THE TAX HEAVEN, brings 10 years of expertise in financial management and taxation. Specializing in ITR filing 📑🗃, GST returns 📈💼, and income tax advisory. He offers astute financial guidance and compliance solutions to individuals and businesses alike. Their passion for simplifying complex financial concepts into actionable insights empowers readers with valuable knowledge for informed decision-making. Through insightful blog content, he aims to demystify financial complexities, offering practical advice and tips to navigate the intricate world of finance and taxation.

Frequently Asked Questions

Since October 1, monthly GST collections from online gaming companies have increased by more than 400% to Rs 1,200 crore, following the introduction of a 28% tax on e-gaming platforms. The GST Council specified last year that online gaming companies are required to pay 28% GST on the total face value of bets.

According to the new regulations, a flat 28% tax will be imposed on the total value of bets made in online games, irrespective of whether they are games of skill or chance. For example, if a player bets INR 100, the new tax system will charge a GST of INR 28 on that sum.

The new rule imposing a 28% GST on entry-level bets on online gaming platforms will come into effect on October 1, 2023. The 28% GST will be applied to entry-level bets on online gaming platforms starting from October 1. The impact on previous notifications and ongoing legal disputes is not yet clear.

Following the 50th GST Council meeting on July 11, 2023, a 28% GST will be applied to the full face value of online gaming, casinos, and horse racing.

In addition to the cases mentioned above, the GST rates for the transport of goods by a Goods Transport Agency (GTA) are as follows: 5% GST if Input Tax Credit (ITC) is not claimed, and 12% GST if ITC is claimed.

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