Online gaming companies will be charged 28 per cent GST on full value of bets by October 1, while offshore platforms will also be required to have GST registration to operate in India.
The finance minister has notified the finance minister on October 1 as the appointed date for the amendments in Central GST and Integrated GST laws to come into effect.
E-gaming firms, however, highlighted that since many states are yet to pass amendments in their respective state GST laws, this notification by the union government in CGST and IGST laws will create confusion.
Online gaming, casinos and horse racing will therefore be treated as 'actionable claims' similar to lottery, betting and gambling and subject to 28 per cent GST on full face value of bets, according to the changes to the GST Act.
The GST bill's amendments make it mandatory for offshore gaming platforms to register in India and pay 28 percent tax, in accordance with the domestic law.
The amendment will also provide for blocking access to online gaming platforms overseas in case of insufficient compliance with the registration and tax payment regulations.
In its meetings in July and August, the GST Council, which includes finance ministers of Centre and states, had approved amendments to the law to include online gaming, casinos and horse racing as taxable actionable claims, and clarification said such supplies would attract 28 per cent tax on full bet value.
Last month Parliament passed amendments to the Central GST and Integrated GST laws to give effect to the Council's decision. On September 6, rules for valuation by these companies were also notified.
The finance ministry has announced that October 1 will be the appointed date for the implementation of these measures.
According to a letter to revenue secretary Sanjay Malhotra, All India Gaming Federation sought to know that with around 15 states yet to make changes to their respective state GST laws, what would be GST treatment that ought to be adopted by online gaming companies registered in those states in relation to deposits received from players of those states.
It asked the Centre to reconsider these notifications and discontinue them until all the states pass their respective amendments, in line with the scheme of GST and the judgment of the Supreme Court of India, and in the meanwhile, address the aforesaid issues vide necessary clarifications so that at an operational level, the industry has some clarification and can accordingly align its processes and technology.
EY Tax partner Saurabh Agarwal said online gaming companies would also need to create a data repository to maintain customer information and other data required for GST compliance in India for a specific period of time.
Is it important for online money gaming companies to follow GST regulations in order to avoid any penalties in the future, he said.
Abhishek Jain, the CEO of KPMG Indirect Tax, said the measures being made effective from October 1, industry needs to ensure appropriate readiness for adoption of the revised taxation.
While most regulations for the revised taxability have been notified, ambiguity on certain matters remains, including classification of the supplies made, time of supply, transition provisions, etc.
The AIGF spokeswoman said the central government has notified the applicability of the new GST regime for online gaming from October 1, 2023. However, it appears that several states have not passed the GST amendment.
This is creating a conundrum where the online gaming companies in such states will have to charge CGST but not SGST. In the same states where the amendment has been done, both CGST and SGST will be charged.
In this light, the industry is hoping that the government will take cognizance of the situation and allow reasonable time for the industry to transition, the AIGF spokeswoman said.
The GST Council in August had decided that the amendment to classify these goods as actionable claims and clarifications to the taxation laws would come into effect from October 1.
A review of the implementation was proposed to be carried out after six months of implementation, which is April 2024.
A number of online gaming, such as Dream11, and casino operator Delta Corp, have received GST show cause notices in this month for alleged short payment of taxes.
In September last year, a Show Cause Notice was sent to GamesKraft for the alleged GST evasion of Rs 21,000 crore.
While the High Court of Karnataka has ruled in favor of the company, the centre filed a special leave petition in the Supreme Court in July. The Supreme Court's decision to hear the case on October 10 is a departure from the HC order.