Are you in the online gaming or casino industry in India? Stay up to date with the GST laws and regulations that apply to your business. Find out about the benefits of the GST on online gaming and casino industry in India in this blog.
The Goods and Services Tax (GST) is a comprehensive indirect tax levied on the supply of goods and services in India. The GST system was introduced in 2017 as a replacement for various indirect taxes such as the Value Added Tax (VAT) and the Service Tax. It is a destination-based tax, which means the tax is collected in the state where the goods or services are consumed. This in article, we will discuss about GST on Online Gaming and casinos.
Online gaming and casinos are two industries that have seen significant growth in recent years. With the increasing popularity of online gaming and the proliferation of mobile devices, more and more people are participating in online gaming activities. Online casinos, on the other hand, have become more popular with the increasing accessibility of the internet and the availability of online payment methods. This blog will explore the GST implications for online gaming and casinos in India.
GST on Online Gaming
Online gaming is a service that involves the participation of users in various games and competitions through the internet. These games can be played on computers, laptops, or mobile devices. Online gaming can be classified into two categories: skill-based games and chance-based games.
Skill-based games involve the use of the player’s skills and abilities to win the game. Examples of skill-based games include chess, carrom, and rummy. Chance-based games, on the other hand, involve the use of chance or luck to win the game. Examples of chance-based games include poker, slot machines, and roulette.
Under the GST system, skill-based games are taxed at 18% while chance-based games are taxed at 28%. The GST rate for chance-based games is higher because they are considered to be games of chance and are therefore seen as a source of entertainment rather than a source of skill.
GST on Online Casinos
Online casinos are virtual platforms that allow users to play and wager on casino games such as slots, roulette, and blackjack. These games are played using real money and are often offered in conjunction with various bonuses and promotions.
Under the GST system, online casinos are taxed at 28%. This rate applies to all services provided by online casinos, including the provision of casino games, the use of online platforms, and the use of online payment methods.
GST Compliance for Online Gaming and Casinos
Online gaming and casino companies are required to register for GST if their annual turnover exceeds the threshold limit of ₹20 lakhs. Once registered, these companies are required to file monthly GST returns and pay any GST owed to the government.
Online gaming and casino companies need to comply with GST laws and regulations to avoid any legal consequences. Non-compliance can result in fines and penalties, as well as damage to the company’s reputation.
GoM on GST on Online Gaming and Casinos
Currently, the applicable GST rates for online gaming and casino earnings are as follows:
- For skill-based games, such as esports, puzzles, and certain card games, an 18% GST applies under HSN 998439, but only on the platform’s commission or service fee, or on gross gaming revenue (total stake value minus distributed winnings)
- For games of chance, including casino gambling, a 28% GST is charged under HSN 999692 on the total bet value.
Following the 50 GST Council meeting on 11 July 2023, a 28% GST on the full face value will apply to online gaming, casinos, and horse racing. This update is pending implementation as it requires amendments to the GST law.
How is the GST on online gaming and casinos is calculated?
Two ways exist for an online gaming platform to retain funds:
- An admission fee (often 10–20%) for using the platform or playing the game.
- A part of the pot money is set aside for prize money distribution.
- Only the platform/rake cost is subject to an 18% charge in a game of skill. As an example, let’s say 10 players in the game of rummy decide to wager ₹500, and the platform charges a fee of 10%.
The total gross value of games of chance, however, will be subject to a 28% GST charge. As a result, in the previous example, the tax incidence rises to ₹28 whether the game is treated as a game of chance or when the gains are treated similarly to a casino bet.
Casino and Online Gaming Service Provider Input Tax Credit Claims
A registered taxable person may claim an input tax credit (ITC) on products and services used to develop the business under Section 16(1) of the CGST Act. However, the CGST Act’s Section 17(5) puts various limitations on when ITC can be claimed, which are detailed below. Furthermore, the 48th GST Council has not yet convened to decide whether casinos and online gaming companies will eventually be taxed.
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Advance decisions on the GST for gaming in casinos and online
The GST’s applicability to gaming and wagering has been disputed in many Indian courts.
In Gurdeep Singh Sachar v. Union of India and Others, the Bombay High Court determined that only the consideration received for the supply of goods or services within the platform is subject to GST, not the player’s total deposit.
In a similar vein, the Supreme Court of India (SC) determined that Dream 11 was a game of skill and that such games aren’t covered by the Public Gambling Act in Varun Gumber v. Union Territory of Chandigarh and Ors. In the Union of India v. Skill Lotto Solutions Pvt Ltd. case, the SC also maintained the constitutional validity of the GST levied on lotteries, wagering, and gaming.
India’s online skill gaming market is expanding, and by FY25, revenues are predicted to total ₹29,000 crores. However, the uncertainty around gst apply online gaming and casinos has hurt its chances. Unfortunately, lumping the booming online gaming sector in with gambling (as suggested) may not be in its best interests.
Conclusion
In India, the GST tax system applies to internet gambling and casinos. While chance-based games and internet casinos are subject to a 28% tax, skill-based games are only taxed at an 18% rate. Online gambling and casino businesses should register for GST and abide by all applicable rules and regulations to prevent any legal repercussions.
FAQs
Are online games subject to GST?
Yes. At the moment, skill-based games are GST-exempt, whereas games of chance are taxed at 28%. However, the government is thinking about eliminating the distinction and classifying all video games as depreciable products, which would subject them to a 28% GST charge.
Does GST apply to gambling winnings?
Yes. Currently, a flat 28% GST is applied to all casino winnings.
Will GST apply to every casino bet?
The Government has suggested imposing GST just on the entry fee paid to the casino and disallowing further bets made with gains from previous rounds.
What is the tax on online casinos in India?
In India, online casinos are subject to GST, which is levied based on the nature of the games offered. For skill-based games, an 18% GST applies to the platform's commission or service fee. For games of chance, a 28% GST is charged on the total bet value.
How are casinos taxed in India?
Casinos in India are taxed primarily through GST. For online casinos, a 28% GST is applied on the total bet value for games of chance. For physical casinos, the taxation varies by state, with state governments imposing taxes and levies in addition to GST.
What is the current GST on casinos in India?
28% GST is applicable on the total bet value for games of chance in casinos. This rate applies to both online and physical casinos, following the 50th GST Council meeting on July 11, 2023, pending legal amendments for full implementation.
