51st GST Council Meeting 2023
On the 2nd of August 2023, the 51st meeting of the Goods and Services Tax (GST) Council was conducted through video conferencing in New Delhi under the leadership of Union Finance Minister Nirmala Sitharaman. Alongside her, Revenue Secretary Sanjay Malhotra, Union Minister of State for Finance Pankaj Chaudary, and other state ministers also participated in the session.
The primary agenda of this Council meeting was to provide clarity on the taxation of online gaming and casinos based on the recommendations put forth in the previous 50th GST Council meeting held on 11th July 2023.
Key Highlights of the 51st GST Council Meeting:
- No Change in 28% GST Rate: The Council maintained the 28% GST rate for online gaming, casinos, and horse racing activities. Despite opposition from the online gaming sector, the Council upheld its earlier decision.
- Amendments in CGST and SGST Acts: Amendments were approved for the Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) Acts concerning online gaming taxes. These amendments aimed to bring clarity and consistency to the taxation of online gaming activities.
- Review of GST Implementation on Online Gaming: The Council agreed to review the GST implementation on online gaming after six months. This review is intended to assess the impact of the 28% GST levy and make necessary adjustments if required.
- Clear Definition of Actionable Claims: The Council approved a clear definition of “actionable claims” in online gaming. This definition is expected to provide a comprehensive framework for tax treatment.
- Inclusion of Online Money Gaming: Online Money Gaming (OMG) was included in the definition of Online Gaming. The definition now encompasses games based on skill and chance, ensuring a comprehensive approach to taxation.
- Definition of Online Gaming: The Council defined online gaming as those offered on the internet or e-network, including online money gaming.
- Insertion of Definition of ‘Virtual Digital Asset’: The Council agreed to include the definition of “virtual digital asset” in the GST law as defined in the IT Act. This step aims to address taxation complexities related to virtual assets.
- Bringing Online Money Gaming under IGST Ambit: The Council approved the proposal to bring online gaming supplied by entities outside the taxable territory under the Integrated Goods and Services Tax (IGST) ambit.
- Measures for Non-Compliant Gaming Apps: The Council approved the proposal to block all online gaming apps and platforms that do not comply with tax rules. Offshore gaming companies could face registration and action under the IT Act for non-compliance.
- Differentiation between Online Gaming and Online Money Gaming: The Council recognized the need to differentiate between Online Gaming and Online Money Gaming for appropriate tax treatment based on the nature of the games.
Expectations from the 51st GST Council Meeting:
During the 50th GST Council meeting, discussions revolved around the taxability of casinos, race courses, and online gaming. After considering the recommendations of the Group of Ministers (GoM) report, the Council reached a consensus to levy a 28% GST on all three activities.
The move to impose a 28% GST on the full value of bets, particularly in online gaming, garnered criticism from the gaming sector. This decision significantly reduced potential customer winnings and was perceived as detrimental to player engagement and online gaming revenues.
The 51st GST Council on 2nd August 2023 aims to approve rules for implementing the 28% GST levy on casinos, race courses, and online gaming. There are expectations that the Council may adopt stricter measures and impose penalties on gaming apps and platforms that attempt to evade taxes. Such non-compliant entities could face a ban or other stringent actions.
Conclusion:
The 51st GST Council meeting held on the 2nd of August 2023 addressed crucial issues surrounding the taxation of online gaming and casinos. While maintaining the 28% GST rate garnered criticism from the gaming industry, the Council’s decisions to amend acts and provide clear definitions aimed to bring transparency and accountability to the sector. The review after six months will be critical in assessing the impact of the GST levy, and the gaming industry awaits further developments on measures to enforce tax compliance.
