GoM likely to discuss imposing flat 28% GST on online gaming

Set to meet on Monday to iron out issues, including tax ambiguities

An empowered group of ministers (GoM) — set up to look into online gaming, casinos and races — may consider deliberating a blanket 28 per cent goods and services tax (GST) on online gaming.

The GoM may also club these into one category during its upcoming meeting on Monday, said two people privy to the development.

The GoM, which was constituted by the GST Council, will be meeting on Monday to discuss ambiguities in valuation of services and their taxability.

At present, the entire transaction value — which includes the winning amount — attracts GST. Most online gaming platforms pay 18 per cent GST as platform fees.

The ministers’ panel is likely to deliberate whether GST is applicable on the total transaction value. This includes the prize money, or the net commissions (revenues) that accrue to gaming firms.

Online gaming has been facing tax conundrum, as authorities are taxing full bet amounts instead of only the commission. Or, they are processing charges, which are just a fraction of the entire bet amount.

“The online gaming sector constitutes primarily a game of skills and like any e-commerce platform is chargeable at 18 per cent GST on the platform fees alone. The entire gaming industry expects the GoM to clarify and formalise the stand by clearly laying down valuation rules for this sector, said Bipin Sapra, partner, EY.

GoM may also discuss best global practices while assessing taxability on services, said one of the persons cited above.

The meeting assumes significance as online gaming companies have seen an increase in their subscribers despite uncertainties.

The seven-member GoM is examining whether any change in legal provisions is required for valuation of services provided by online gaming, race courses and casinos.

It will also examine the taxability of certain transactions in casinos related to present legal provisions and orders of Courts.

Earlier this year, the online gaming industry’s lobby group — including Dream11 and Mobile Premier League — approached the finance ministry.

The lobbyists pleaded that the statutory provision of GST— that is, Rule 31A of the CGST Rules 2017 (applicable to lottery, betting, gambling, and horse racing) — should not apply to games of skill.

The Council had formed a GoM last year, which was reconstituted in February.

The reconstitution was necessitated as the earlier convenor Nitin Patel was dropped from the Gujarat's council of ministers in September last year.

Finance minister of Uttar Pradesh Suresh Khanna is the new member while finance minister of Gujarat Kanubhai Patel has replaced Nitin.

Similarly, Chandrima Bhattacharya replaced Amit Mitra as the representative of West Bengal.