New Delhi: The GST Council’s Law Committee discussed the issues over the definitions for ‘Games of Skill’ and ‘Games of Chance’ to ease the formation of separate taxation design for them. The panel met on Saturday with industry experts in Bengaluru to ponder over the same. All states are not part of the law committee and hence the draft report on definition would be shared with all states for their views, reported news agency PTI.
The Centre and state GST officers have been mulling over the separate taxation structure as many states were of the view that games that require skill should attract a lower tax rate. They are of the opinion that ‘Games of Skill’ should not be treated at par with ‘Games of Chance’, the report added.
The complex issue of levying Goods and Services Tax (GST) on online games has been hanging fire for over a year now and in the absence of a clear definition, tax notices are sent to online game portals that ultimately leads to litigations. Industry has been demanding that games of skill should continue to be taxed at a lower rate as a higher tax rate would substantially reduce the prize money. Only after a definition is finalised, a call would be taken on the tax rates to be levied and also on whether it should be levied on gross gaming revenue or deposits by gamers, reported the news agency citing sources.
The report further stated that the Group of Ministers (GoM) want to present a report to the GST Council, which was legally tenable and could not be challenged in the courts. The GoM will consult all stakeholders before finalising its report.
The meeting of the GST Council is likely to be held by the end of December after the conclusion of state elections in Gujarat and Himachal Pradesh. It will be chaired by Union finance minister Nirmala Sitharaman and her state counterparts. The Council will discuss the report of the GoM on taxation of online gaming, casinos and horse racing.
Earlier in June, the Group of Ministers, under Meghalaya chief minister Conrad Sangma, had suggested the GST Council that the online gaming sector should be taxed at 28 per cent. The Council, however, asked the GoM to further deliberate on the taxation of online gaming, and casinos.
Currently, a 28 per cent GST is imposed on 'Games of Chance', which involves some form of betting/gambling, while skill gaming sector pays 18 per cent GST. The tax is charged on gross gaming revenue, which is the fees charged by gaming portals. Experts say that charging 28 per cent GST on the entire amount, which a player deposits for a game for both categories of online game, would reduce the prize money left for distribution and drive away players from legitimate tax deducting portals. This may also encourage online gamers towards unlawful portals that do not deduct tax, the report added.
AMRG & Associates Senior Partner Rajat Mohan said industry expects policy-level clarity on all the critical aspects of the gaming sector, which includes chargeability of tax on the un-played bets, valuation of services, applicable rate of tax on game of skill/ chance, point of taxation for gaming services, applicability of tax on bonus/cash-backs etc. He said, “Policy level clarity from the GST Council is the need of the hour to fuel growth in the entire online gaming sector.”
Online gaming witnessed a sharp surge during COVID-19 lockdown with the number of users in India rising substantially. As per a KPMG report, the online gaming sector would grow to Rs 29,000 crore by 2024-25, from Rs 13,600 crore in 2021.
(With inputs from PTI)