The Way is Now Clear for the Introduction of the Bill During the Current Parliamentary Session

On Wednesday [09/08/2023], the Union Cabinet granted approval for a bill aimed at amending existing laws to provide clear guidelines regarding the consistent application of a 28 percent GST rate for online gaming, casinos, and horse racing. This was confirmed by official sources within the government. The bill will involve amendments to key statutes such as CGST, IGST, and UT GST laws.

It is anticipated that the bill will be presented within the remaining days of the current monsoon session of Parliament. The GST Council, during its meeting on July 11, proposed the imposition of a uniform tax rate of 28 percent on casino activities, horse racing, and online gaming. This tax will be calculated based on the initial value of chips purchased in casinos, the complete amount of bets made through bookmakers/totalisators in horse racing, and the total value of bets placed in online gaming. The council subsequently gave its endorsement to this mechanism during its meeting on August 2.

The council suggested making appropriate amendments to the law to incorporate online gaming and horse racing into schedule III as taxable actionable claims. Additionally, it proposed the inclusion of a specific provision within the IGST Act of 2017. This provision would establish the liability to pay GST for the supply of online money gaming by foreign suppliers to individuals in India, encompassing a simplified registration process for these suppliers under a single Indian registration scheme. Furthermore, in cases of non-compliance with registration and tax payment requirements, the provision would also entail the potential for blocking public access to any information generated, transmitted, received, or hosted on a computer resource utilized for the supply of online money gaming by such suppliers.

Additionally, they indicated that the assessment of the supply value for online gaming and actionable claims within casinos could be grounded on the sum remitted to or set aside for the supplier by or on behalf of the player (excluding amounts allocated from prior game/bet winnings) rather than being based on the complete value of each individual bet made. To align with this approach, the council proposed potential amendments to the CGST Rules of 2017, introducing explicit provisions for the valuation of online gaming supply and the provision of actionable claims within casinos. Furthermore, the council put forth a recommendation for the issuance of particular notifications or amendments to pertinent notifications concerning this matter.

Upon the amendment of the CGST, IGST, and UT GST laws by the Central government, states and two Union territories with legislative assemblies will be obligated to enact corresponding modifications within their SGST Acts. Following these legislative adjustments, comprehensive regulations will be unveiled. The objective is to conclude these processes by the end of the upcoming month, with the aim of effectuating the implementation starting from October 1, 2023.

During a GST Council session on August 2, the Delhi representative raised the question of whether the taxation issue, particularly concerning online gaming, should be reexamined by the group of ministers (GoM). Ministers from Goa and Sikkim suggested a reassessment of the applicability of the 28 percent rate on the entire face value rather than the gross gaming revenue (GGR or service fee charged) in the context of casinos. They emphasized that this could negatively impact their interests due to their status as smaller states. Andhra Pradesh purportedly appealed for a more compassionate approach in considering the valuation basis. Given these recent developments, a review of the mechanism will be conducted six months after its implementation date.

The implementation of this mechanism is anticipated to enhance revenue generation. Sanjay Malhotra, the Revenue Secretary, previously highlighted that in the last fiscal year (2022-23), the government collected just Rs 1,700 crore in GST. He suggested that this figure could have reached Rs 15,000-20,000 crore if the tax had been imposed on the complete value.