From October 1, online gaming companies will charge 28 percent GST on the full value of bets, while offshore platforms would also require GST registration to operate in India.
The Finance Ministry late on Friday announced October 1 as the set date on which the amended provisions in the Central GST and Integrated GST laws would come into effect.
However, e-gaming companies pointed out that since many states are yet to make changes in their respective GST (SGST) laws, this notification by the union government in the CGST and IGST laws will create confusion.
As per the amendments in the Central GST Act, online gaming, casinos and horse racing will henceforth be treated as “receivables”, similar to lotteries, betting and gambling, and subject to a goods and services tax (GST) of 28 per cent on the full nominal value. of betting.
The changes in the Integrated GST (IGST) Act make it mandatory for offshore online gaming platforms to register in India and pay 28 percent tax in accordance with national law.
The amendments will also provide for blocking access to online gaming platforms abroad in case of non-compliance with the provisions on registration and tax payment.
At its meetings in July and August, the GST Council, comprising the Finance Ministers of Center and states, had approved amendments in the law to include online gambling, casinos and horse racing as taxable claims, clarifying that such supplies are 28 percent would attract. tax on the full stake value.
Parliament last month passed amendments to the Central GST and Integrated GST laws to give effect to the Council’s decision. Subsequently, rules for the valuation by these companies were also announced on September 6.
The Ministry of Finance has now announced that October 1 will be the designated date for the implementation of these provisions.
In a letter to Finance Minister Sanjay Malhotra, the All India Gaming Federation (AIGF) sought to know that since around 15 states are yet to make changes in their respective GST laws, what would be the GST treatment to be applied by registered online gaming companies. in those states with respect to the deposits received from players from those states.
It requested the Center to reconsider and suspend these notifications until all states have adopted their respective amendments, in accordance with the scheme of the GST and the judgment of the Supreme Court of India, and in the meantime, address the above-mentioned issues with necessary clarifications , so that at an operational level the industry has some clarity and can align its processes and technology accordingly.
EY tax partner Saurabh Agarwal said online gaming companies will also have to create a data repository to store customer information and other data required to comply with GST regulations in India for a period of time.
It is important for online cash gambling companies to comply with the new GST regulations to avoid any fines in the future, Agarwal said.
Abhishek Jain, head and partner, KPMG Indirect Tax, said that with the said provisions coming into effect from October 1, the industry must ensure proper implementation of the revised taxation.
While most of the provisions have been notified for the revised taxability, there remains uncertainty on certain issues including classification of supplies made, time of supply, transitional provisions, etc., Jain said.
The AIGF spokesperson said that the central government has notified the applicability of the new GST regime for online gaming from October 1, 2023. However, it appears that several states have not adopted the amendment to their GST law.
This creates a conundrum where the online gaming companies in such states will have to charge CGST but not SGST. At the same time, in states where the change has been made, both CGST and SGST will be charged.
In this light, the industry hopes that the government will take note of the situation and allow the industry a reasonable time for the transition, the AIGF spokesperson said.
The GST Council at its meeting in August had decided that the amended provision to classify these supplies as enforceable claims and clarify the tax provisions would come into effect from October 1.
It was proposed to conduct an implementation review after six months, i.e. April 2024.
A host of online gaming companies, such as Dream11, and casino operators, such as Delta Corp, have received GST notices this month for allegedly short-paying taxes.
Additionally, a show-cause notice was issued to GamesKraft in September last year for alleged GST evasion of Rs 21,000 crore.
While the Karnataka High Court has ruled in favor of the company, the Center filed a Special Leave Petition (SLP) in the Supreme Court in July. While staying the HC order, the Supreme Court listed the matter for next hearing on October 10.