[Opinion] Indian Online Gaming Industry Faces 28% GST on Full Value of Bets

PS Krishnan & Prashanth C. – [2023] 152 taxmann.com 703 (Article)

The online gaming industry has always faced ambiguity in taxation as there are divergent rulings in various judicial forums. Recently, the 50th GST Council meeting has recommended a Goods and Services Tax (GST) rate of 28% on the face value/full value of a) the chips purchased in the casinos, b) the bets placed with bookmakers in the case of horse racing and c) and the bets placed in the case of online gaming.

This industry is booming in India and witnessed a growth of 50% during the pandemic. Tax collections from this industry presently stand at INR 1,700 crore and are expected to increase multifold in future. Revenues of this industry, basis some estimates, stood at INR 13,500 crore in FY 2022, which is expected to grow to INR 23,000 crore by FY 2025. It is the fourth largest sub-sector within the media and entertainment sector. The Council’s decision impacts the gaming industry in general and real money gaming in particular.

In the past, the industry had received certain favourable rulings which upheld that GST is applicable only on the platform fee and not on the full value of money paid by users to play games. Also, there were rulings which held that the rules requiring taxing the full value of bets were ultra-vires the act in the case of horse racing.

The group of ministers, in their report, stated that they could not reach a consensus on whether the GST should be charged on the gross gaming revenue or on the full value of bets; however, there was consensus amongst states on a GST rate of 28%. The GST Council was authorised to finalise the issue.

The GST Council has recommended that amendments should be made to the GST law to ensure that the bets placed in online gaming and horse racing should be considered taxable actionable claims and the full-face value of bets placed should be taxed at a uniform rate of 28%. Post the meeting, the Revenue Secretary, Sanjay Malhotra, has gone on record saying that the government is expecting a multifold increase in the revenues from the industry. He has hinted at the revenues growing at around 10 times from INR 1,700 crore at present.

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