Doubts over whether GST Council will discuss online gambling taxation this month

GST Council is expected to decide on online gaming taxation in the third or fourth week of June.

India.- The Goods and Services Tax (GST) Council had been expected to provide clarity on tax rates for online gaming during its upcoming meeting, likely to be in the third or fourth week of June. However, the gaming industry has doubts as to whether or not this will finally happen.

The focus of the June meeting is now expected to centre around the establishment of GST Tribunals under the GST Act, leaving the fate of online gaming taxation in limbo.

A panel of state ministers (GoM) proposed a 28 per cent GST rate on online gaming. However, the panel struggled to reach a consensus on whether the tax should be levied solely on the fees charged by gaming portals or extend to the entire consideration, including wager amounts received from players. As a result, it referred all suggestions to the GST Council in December 2022.

The discussion was postponed to the 49th GST Council meeting in February due to the unavailability of Meghalaya’s chief minister Conrad Sangma, who headed the GoM, owing to the elections in Meghalaya.

While West Bengal and Uttar Pradesh have supported a 28 per cent GST on the full value of gaming amounts, the lack of consensus among states and union territories has created uncertainty for gaming companies operating in the country. 

Currently, online skill-based games are taxed at a rate of 18 per cent, while games of chance face a 28 per cent tax rate.

Meanwhile, the Indian government has announced that bonuses, referrals and incentives offered by online gaming companies will be taxed.

New guidelines issued by the Central Board of Direct Taxes mandate online gaming companies to deduct taxes at the source if players claim net winnings, including any received bonuses or incentives. Bonuses and incentives will not be taxed if they remain unclaimed or are not withdrawn.

Under the new regulations, net winnings will be calculated by deducting the amount withdrawn by a player from the total sum of deposits to their gaming account, along with the opening balance at the beginning of the year. Players’ net winnings on online gaming platforms are subject to a 30 per cent tax rate.

If the amount withdrawn is less than 100 rupees (US$1.22) per month, companies will not be required to carry out tax deductions.