Revamping the Game: Tax Amendments Target Online Money Gaming

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In a significant legislative move, the Lok Sabha has given its approval to the Central Goods and Services Tax (Amendment) Bill, 2023, along with The Integrated Goods and Services Tax (Amendment) Bill, 2023. These bills have garnered widespread attention for proposing a 28% Goods and Services Tax (GST) on online games involving real money, horse racing betting, and casino activities.

The primary objective of these amendments is to address the concerns voiced by the domestic online gaming industry. Stakeholders have expressed apprehensions that the proposed alterations related to online money gaming could potentially lead to a migration of such activities to platforms outside of India. By doing so, the amendments aim to create an equitable playing field for domestic online money gaming providers. It is important to highlight that these amendments will not impact the taxation of casual online gaming endeavors that do not involve real money, betting, or wagers.

The envisaged amendments are set to come into effect starting 1 October 2023, marking a new phase in the regulation of the online gaming landscape.

Key Elements of the Proposed Amendment

 Distinction Between Online Gaming and Online Money Gaming: The Central Goods and Services Tax (Amendment) Bill, 2023, introduces a clear demarcation between online gaming and online money gaming. Specifically, online money gaming pertains to an online gaming activity wherein participants make monetary payments or deposits, anticipating winnings from a game or event.

Taxation of Online Money Gaming: The proposed amendments establish a taxation framework for online money gaming, wherein the activity is subject to taxation based on the complete amount paid, payable, or deposited with the supplier by or on behalf of the participant. This taxation mechanism is applicable regardless of whether the game hinges on skill, chance, or a blend of both elements.

Expansion of Scope: Furthermore, the amendment broadens its scope to encompass actionable claims linked to casinos, horse racing, and online gaming, all falling within the ambit of GST. The valuation process for the supply of online gaming and actionable claims associated with casinos is grounded in the player’s payment or deposit made to the supplier.

Inclusion of Digital Platforms: For the sake of clarity, the proposed amendments encompass individuals or entities engaged in operating and managing digital or electronic platforms that supply specific actionable claims. These entities are considered responsible suppliers and are consequently liable to fulfill GST obligations.

The amendments also address the intricate matter of importing intangible goods, such as actionable claims linked to online money gaming, which do not physically cross customs frontiers. This entails granting the government the authority to notify goods for the purpose of levying and collecting IGST (Integrated GST) in such import scenarios.

Officials underscored that the decision-making process involving these amendments spanned nearly three years and took into thorough consideration the potential adverse impact of online money gaming on society, particularly in terms of Internet Gaming Disorder driven by excessive online gaming addiction.

A key aspect of these amendments is the mandatory registration requirement for entities engaged in providing online money gaming services from overseas locations. When enquired with our GST experts they further added that “The proposed changes also introduce streamlined GST registration procedures for such overseas suppliers while concurrently granting authorities the authority to block websites or platforms operated by non-compliant suppliers’. Being adept in GST registration our team assures that GST registration can be done easily through a streamlined online 7 day process. 

With the passage of these bills, India’s regulatory framework for online gaming is poised to experience a transformative shift, influencing the landscape of online money gaming and associated taxation practices.

Team Vakilsearch