Bills seeking amendments to the Integrated Goods and Service Tax Act, 2017, and the Central Goods and Service Tax Act, 2017, was passed in the Lok Sabha on Friday. These two Bills are called The Central Good and Service Tax (Amendment) Bill, 2023, and The Integrated Good and Service Tax (Amendment) Bill, 2023.
The amended provisions in the GST laws, if passed by Parliament, will be effective from October 1.
The decision has been taken after elaborate deliberations spanning over a period of about 3 years. A Group of Ministers (GoM) constituted by the GST Council undertook an extensive exercise including making visits to various places and met with various industry representatives, Finance Ministry said.
The amended provisions in the GST laws specifically define online gaming, online money gaming, virtual digital assets used to pay for online games and suppliers in case of online gaming.
The changes to GST laws were approved by the Union Cabinet on Wednesday. In its 51st meeting on August 2, the GST Council recommended amendments to the Schedule III of the CGST Act, 2017, to provide clarity on the taxation of supplies in casinos, horse racing and online gaming.
Central Good and Service Tax (Amendment) Bill, 2023
The Bill to amend the Central Goods and Services Tax Act paves the way for implementation of the 28 percent Goods and Service Tax (GST) on the face value of entry-level bets placed on online gaming platforms, casinos, and horse racing.
The online gaming industry and some horse racing clubs are currently paying GST at the rate of 18 percent on platform fees/commission ranging from 5 to 20 percent of the full face value, while some horse race clubs are paying 28 percent on the full face value.
They are disputing the 28 percent levy on actionable claims in the form of betting and gambling before various legal fora. Casinos, too, are currently paying 28 percent GST on Gross Gaming Revenue (GGR).
Levying 28 percent GST on the full face value of entry-level bets would result in increased GST revenues.
The proposed amendments in the CGST clarifies that:
> The proposed amendments introduced through “The Central Goods and Services Tax (Amendment) Bill, 2023 make a clear distinction between online gaming and online money gaming specifying that online money gaming is that online gaming in which the player pays or deposits an amount in the expectation of winning some amount in a game or event, etc.
> The proposed amendments do not affect the tax on casual online gaming in which no real money or betting or wager is involved.
> The proposed amendments make it clear that the activity of online money gaming will be taxed on the total amount paid or payable to or deposited with the supplier by or on behalf of the player, irrespective of whether the game is based on skill or chance or both.
> Any payments made by cryptoassets will also be taxable.
> Actionable claims involved in or by way of casinos, horse racing and online gaming are covered under the ambit of GST.
> The definition of "supplier" is proposed to be amended to ensure that individuals or entities operating and managing digital or electronic platforms for supplying specified actionable claims are considered suppliers of such actionable claims and liable to pay GST on the same.
> Registration under GST is being made mandatory for a person supplying online money gaming, from a place outside India to a person in India.
Integrated Good and Service Tax (Amendment) Bill, 2023
The Council also recommended inserting a provision in the IGST Act, 2017, to impose GST liability on online money gaming provided by offshore entities. Such entities would be required to get GST registration in India.
The amendments will also provide for blocking access to online gaming platforms located overseas in case of failure to comply with registration and tax payment provisions.
The proposed amendments in the IGST ACT involves:
>A special provision to provide for tax liability on overseas suppliers of online money gaming and also the provisions for simplified GST registration for such suppliers as well as powers for blocking websites/platforms of non-compliant suppliers.
> In case of import of intangible goods such as actionable claims involved in or by way of online money gaming etc., which do not physically cross customs frontier, IGST cannot be collected through Customs. The amendments propose to give powers to the Government to notify such goods, so that in case of import of such goods IGST can be levied and collected as regular inter-State supply under provisions of IGST Act.
> There's no effect of the amendments on start-up ecosystem in India, as it brings a parity between International entities & domestic ones.
> Clarification that the bills provide for no change in respect of taxation of casual online gaming, which does not involve real money or betting/wagering and therefore, such apprehensions are unfounded.
Commenting on the amendments, Rajat Mohan, Senior Partner at AMRG & associates said that the online gaming companies shall not expect any litigation in respect of the charge of GST prospectively.
"However, litigation for the old period would continue. These regulations made it clear that foreign online gaming companies would receive the same treatment as their Indian counterparts and would need to register in India in order to pay GST. The suggested changes clearly distinguish between online gaming done for real money and playing for free. Considering there is no actual money, betting, or wagering involved, policymakers has excluded casual online gaming from taxes," Mohan said.
(With inputs from agencies)
First Published: Aug 11, 2023 9:20 AM IST
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