Online Gaming: FM Sitharaman-led GST Council Meets Today to Clarify 28% Tax Definition.


Finance Minister Nirmala Sitharaman-led Goods and Services Tax Council is scheduled to convene on Wednesday, with the primary agenda of clarifying the definition and application of a 28 per cent tax on online gaming.

The GST Council aims to shed light on the criteria that would constitute online gaming for the purpose of taxation. This includes determining whether games based on skill or chance would fall under the tax ambit.

The meeting will be held via video conferencing, and it comes after the council’s decision in the previous meeting on July 11 to impose a 28 per cent GST on online gaming, horse racing, and casinos at their full value. The government is also planning to introduce necessary amendments to the GST Act during the ongoing Monsoon Session of the Parliament to include online gaming and horse racing as taxable actionable claims.


The online gaming industry has expressed concerns about the 28 per cent taxation. Bimal Jain, Chairman of the Indirect Tax Committee at PHDCCI, emphasized the need for a clear distinction between skill-based online games and games involving betting and gambling. He argued that a lower 18 per cent tax rate would have been more reasonable to support the growth of the industry, including startups in this sector.

Roma Priya, founder of Burgeon Law, a legal firm focused on the startup ecosystem, criticized the 28 per cent tax on online gaming for disregarding the difference between skill-based games and games of chance. Treating skill gaming as equivalent to gambling goes against legal precedents and could negatively impact customers, as they will receive reduced playable value. Roma Priya further added that this taxation approach could hinder the overall growth of the industry.

Suman Bannerjee, CIO of a US-based hedge fund, Hedonova, expressed concerns about the potential negative impact of the 28 per cent tax on the online gaming industry.

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Sanjay Chhabria, Director of Indirect Tax at Nexdigm, acknowledged the positive step of the council in considering industry feedback on the 28 per cent tax on online gaming. However, he noted that a complete rollback of the levy seems unlikely. He suggested that industry players should take this opportunity to advocate for a reduced GST rate, a clear distinction between skill-based and chance-based games, and a shift in valuation mechanism to prefer gross gaming revenue over the value of bets.

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