GOM may recommended 18% GST for Game of Skills, 28% GST for Game of chance in online gaming industry

People with knowledge of the situation say that the Group of Ministers (GoM) that was set up to review the goods and services tax (GST) on online gaming, casinos, and horse racing is likely to keep the 18% tax on gross gaming revenue (GGR).

The GoM, which is led by the chief minister of Meghalaya, Conrad Sangma, could recommend putting the highest GST rate of 28% on betting, casinos, and horse racing, while making a distinction between games of skill and games of chance.

The GoM is not expected to stop making recommendations until after the IT Intermediary Amendment Rules 2023 are put into place. The GST council will make the final decision at its next meeting, which will probably be in the last week of May or the first week of June.

At the moment, the gross gaming revenue from online gaming that does not involve betting is subject to an 18% GST.

In an earlier report to the council, the GoM suggested a 28% GST on GGR for all online games, whether they were games of skill or luck.

The Finance Act of 2023 made it clear that online gaming is a new industry that is different from gambling and betting. This is what caused the government to change its mind. It also had different rules about how to tax winnings from online gambling.

“Since the report was turned in, a lot has changed, so the recommendation will be looked at again,”

The GoM could also suggest that there be one more round of talks with people in the industry and GST officials. Last week, the Centre announced new rules for online gaming under the IT Act of 2000. The rules suggest that self-regulatory organisations (SROs) should be able to let online real-money games happen.

According to the rules, games that use real money will have to follow KYC norms. The Finance Act of 2023 put a 30% tax deducted at source (TDS) on “net winnings” from online games in the “user account” at the end of the fiscal year. The gaming company is responsible for paying this tax.

The rules will start on April 1. If the deductee doesn’t file a return and the TDS amount from the previous year was more than 50,000, the TDS will be doubled.

The business world has been happy with the TDS provision and has asked for the same clarity with GST.

Roland Landers, CEO of the All India Gaming Federation (AIGF), said, “Given that the new MeitY (Ministry of Electronics and Information Technology) rules for online games and the developments with TDS are good for the industry, we hope for similar clarity with GST.”

At the moment, the online gaming industry has to deal with a GST demand of about 28,000 crore.

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