GST Council likely to clarify definition of online gaming on August 2
According to sources reported by CNBC-TV18 on July 28, 2023, the GST Council is planning to address and clarify the definition of online gaming during its upcoming meeting on August 2, 2023. This move comes after the council previously announced a 28 percent tax on online gaming but is now seeking to provide more clarity on what exactly falls under this category.
In addition to defining online gaming, the GST Council is also expected to introduce a new definition for ‘online money gaming.’ This new definition is likely to differentiate between games that involve a combination of skill and chance, potentially impacting the taxation rates applied to such games.
Headed by Union Finance Minister Nirmala Sitharaman, the GST Council is also anticipated to discuss and clarify the taxation rules concerning other forms of online entertainment, such as online casinos and horse racing.
This upcoming meeting holds significance as it aims to provide a clearer regulatory framework and tax guidelines for the rapidly growing online gaming industry in India. By defining and distinguishing different categories of online gaming based on skill and chance, the council seeks to address potential ambiguities and ensure a more structured and consistent approach to taxation in this sector.
According to sources, the likely definition of online gaming will encompass any game offered on the internet or an electronic network, and this definition will also include online money gaming. Online money gaming, on the other hand, is expected to refer to games where players pay or deposit money, including virtual digital assets, with the expectation of winning money in return.
As part of the upcoming meeting on August 2, 2023, the GST Council is also expected to introduce a provision for online money gaming provided by individuals or entities located outside the taxable territory. This means that such individuals or entities engaged in online money gaming will fall under the purview of the Integrated Goods and Services Tax (IGST).
To enforce compliance with tax regulations, the GST Council is likely to approve the blocking of all online gaming apps and platforms that do not adhere to the tax rules. This measure is aimed at ensuring that online gaming businesses operating within the country comply with the GST regulations and pay the appropriate taxes.
The proposed clarifications and provisions by the GST Council seek to bring greater transparency and structure to the taxation of online gaming and online money gaming activities in India. By defining these categories and outlining tax guidelines, the council aims to create a more regulated and accountable environment for the rapidly growing online gaming industry.
As part of its deliberations, the GST Council is expected to broaden the scope of taxable activities by including a new category called “specified actionable claim.” This category will encompass various activities such as betting, casinos, gambling, horse racing, lottery, and online money gaming.
In terms of taxation, the council is likely to consider levying the Goods and Services Tax (GST) on the “total amount paid to or deposited with the supplier by way of money or money’s worth, including virtual digital assets, by or on behalf of the player” for online gaming. This means that the GST will be applicable to the entire amount paid by players to the gaming service provider, whether in monetary form or in the form of virtual digital assets, on behalf of the players engaging in online gaming activities.
By introducing these provisions and clarifications, the GST Council aims to establish a comprehensive and consistent framework for taxing online gaming and related activities in India. These measures seek to bring greater clarity and transparency to the taxation of online gaming services and to ensure that tax compliance is effectively enforced across the industry.
The GST Council is set to discuss and consider the taxation of various aspects of the gaming industry, including casinos. For casinos, the council plans to deliberate on levying GST on the “total amount paid by or on behalf of the player for the purchase of the tokens, chips, coins, or tickets” used in the gaming activities.
In addition to the discussions on casinos and other gaming activities, the GST Council is also proposing to introduce a new provision that includes the definition of “virtual digital asset.” The definition of this term will align with its interpretation as per the Income Tax Acts.
Notably, during a previous meeting on July 11, the GST Council had already made the decision to impose a 28% tax on the turnover of online gaming companies, horse racing, and casinos. This move aimed to bring these gaming activities under the GST framework and subject them to the relevant tax rates.
By addressing the taxation of casinos and introducing definitions related to virtual digital assets, the GST Council seeks to create a more comprehensive and clear regulatory environment for the gaming industry in India. These measures are part of the council’s efforts to ensure appropriate taxation and accountability in the growing gaming sector.
