• govt clears air on repeat taxation to players gst only on deposits

October 27, 2023
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Govt Clears Air on Repeat Taxation to Players, GST only on Deposits


The GST Council has opted to maintain a uniform 28 percent tax slab for online games, casinos, and horse racing. In case you are not aware, from now on, players will have to pay 28% GST while depositing money to play online games. The rule is expected to be implemented from October 1, 2023. Therefore it’s important to understand its implications on the overall industry.


GST will be levied only on deposits

The council during its 51st meeting announced that players will have to pay 28% GST on add cach. Finance Minister Nirmala Sitharaman at a press conference stated, “Valuation of supply on online gaming & actionable claims in casinos may be done basis amount paid or payable to or deposited by supplier or on behalf of the player excluding amount entered into games from winnings of previous games or bets.”


Now let’s understand the entire tax framework with an example. 


Suppose you make a deposit of 100 to play a game of online rummy. Under the new rule, you will pay 28% GST to the government, which in this case would be ₹22.. After GST deductions, ₹78 will be credited to your wallet on the app. 


It’s important to note that the deposit amount will be inclusive of GST. This is why you are not paying ₹28 GST on depositing ₹100 but ₹22 only. 


Please note GST is imposed on the funds entering the account, not on the amount being deposited. In this context, 28% GST would be applied to 78, which amounts to approximately 22. This is different from what some people might assume, where they think GST would be calculated on the full 100.  


Now suppose you make a profit of 300, by playing a game of rummy online. The following scenarios will be applicable.


  • You don’t have to pay any GST on the profit earned.
  • You don’t have to pay any GST during withdrawal.
  • You don’t have to pay any GST for every game you play.


GST on Online Gaming

According to the Supreme Court, a skill-based game is one where the outcome is dependent on the expertise, practice, and experience of the player. Some examples of skill-based games include rummy, poker, and fantasy sports. Platforms that offer such games were earlier paying 18% GST on platform commission or Gross Gaming Revenue.


In contrast, games of chance are governed by Rule 31A of the CGST Rules, 2018, which imposes a higher GST rate. Apps that offer online lottery were paying 28% GST.


However, the council during its 51st meeting said that players will have to pay 28% GST on online games regardless of their skill-based or chance-based elements.


India a frontrunner in the global Online Gaming 

The online gaming sector in India has witnessed substantial expansion, establishing itself as one of the leading markets on a global scale. According to a report by Deloitte, the domestic online gaming industry had a value of $0.54 billion in FY16, and it has experienced significant growth, reaching a value of $2.6 billion in FY22. 


The same report indicates that it is expected to expand further to approximately $8.6 billion by FY2027, with a compound annual growth rate (CAGR) of 27%. Moreover, Indian gaming companies have attracted investments totaling $2.8 billion from international investors over the past five years.


What next for the Indian Online Gaming Industry?

It’s very difficult to predict the exact repercussions of the new rule on the Indian online gaming industry because earlier the tax was collected on revenue but now it will be collected on deposits. However, studies conducted by the E-Gaming Federation and Indian Statistical Institute, Kolkata found that India can lead the online gaming sector on a global scale.


Finance Minister Nirmala Sitharaman has also assured that the decision to levy GST on deposits will be reviewed six months after implementation because they don’t want to kill any industry.


This gives a ray of hope to the rapidly booming online gaming sector. Moreover, it will give gaming companies a chance to innovate and re-pivot.