50th GST Council: One Levy for Skill and Chance Games

14 Jul 2023

All Gaming Will Attract 28% GST on Full Ticket Value

After a prolonged period of uncertainty and speculation, India’s GST Council made a controversial decision at its 50th Meeting on July 11 in Delhi to recommend a uniform levy of 28% Goods and Services Tax (GST) on the full value of bets, entry fees or tickets for all forms of gaming in the country, including online games, horse races, and casinos.

“Online gaming, horse racing and casinos will be taxed at 28% (all three activities) and they will be taxed on full face value,” Union Finance Minister Nirmala Sitharaman announced at a press conference in New Delhi.

“Suitable amendments to be made to law to include online gaming and horse racing in schedule III as taxable actionable claims. Tax will be applicable on the face value of the chips purchased in the case of casinos, on the full value of the bets placed with bookmaker/totalisator in the case of horse racing and on the full value of the bets placed in case of the Online Gaming,” a press release issued by the GST Council clarified.

GST Council Went Back to the Original GoM Proposal

Thus, the GST Council has, in practice, accepted the first proposal by the Group of Ministers (GoM) tasked to examine the matter, which was returned for reconsideration by the Council at its 47th Meeting at the end of June 2022.

The decisions of the GST Council are not final, and the proposed changes to GST treatment of gaming will have to be approved by Parliament. According to some analysts the new tax legislation will be met with legal challenges and litigation when this happens.

“Now, it is also almost certain that the (gaming) industry will be challenging these amendments to the GST laws, as and when they are brought into force in the courts on constitutional grounds. The industry will also likely be seeking interim relief from courts as and when the law is brought into force,” technology and gaming lawyer Jay Sayta commented.

Currently, Indian operators of online fantasy sports and other forms of online gaming that have received certain recognition for being skill-based pay 18% GST on their trade margin, also called GGR (gross gaming revenue), and prize pools are not levied.

The Homegrown Industry Reacted Immediately with Cries of Distress

The recommendations of the 50th GST Council Meeting seek to remove any distinction between games of skill and games of chance in GST treatment. The homegrown skill gaming industry reacted immediately, expressing distress, as the proposed changes mean a 1,100% tax burden hike and will disrupt their established business model.

“We believe this decision by the GST Council is unconstitutional, irrational, and egregious,” All India Gaming Federation (AIGF) CEO Roland Landers stated.

“This decision will wipe out the entire Indian gaming industry and lead to lakhs of job losses and the only people benefitting from this will be anti-national illegal offshore platforms,” Landers added.

“A change in valuation to tax on the total consideration will cause irreversible damage to the industry, loss of revenue to the exchequer, and loss of employment for lakhs of skilled engineers,” Federation of Indian Fantasy Sports (FIFS) Director-General Joy Bhattacharjya said.

“One of the options that we will give a serious look at will be a legal recourse. It’s a little early to decide…but we will definitely talk to other big players in the industry and decide what we need to do,” a source from gaming company Gameskraft pointed out.

Union FM: The Exchequer has no Business Distinguishing b/n Skill and Chance

According to FM Sitharaman, the GST Council recommendations are based purely on tax considerations, even though the moral aspect was also discussed, and are not intended to be “killing any industry.”

“Whatever be the decision on each of the games being either skill-based or chance-based or neither is not something we’re looking at,” the FM explained during the press conference after the GST Council Meeting.

“We are purely looking at that which is being taxed…because it creates value, profit is being made, wagers are being levied… and based on the wager people are making windfall. Today’s decision looks at that aspect,” Nirmala Sitharaman added.

Regarding the moral issue, the Finance Minister said that online gaming should not be “promoted more than essential industries” by subjecting them to a lesser tax regime.

“Our agenda is not to end any industry… all types of businesses have to function… there was discussion on the moral question that on one front, you do not want to end an industry. But that does not mean that you give more incentives to them than essential goods… all states participated in this decision which has been pending for the last 2-3 years. We could take the decision because every state clearly participated in it,” Sitharaman pointed out.

“The decisions were intensive and were taken after consultation with all the members, including those representing states like Goa and Sikkim, where casinos form a key part of the tourism sector,” she added.