India's Finance Ministry late on Friday notified October 1 as the appointed date for amended Central GST and Integrated GST provisions to take effect, extending 28% Goods and Services Tax to the full face value of bets on online gaming, casinos and horse racing1. A host of online gaming companies, such as Dream11, and casino operator Delta Corp received GST show cause notices in the same month for alleged short payment of taxes1.
Under the changes to the Central GST Act, online gaming, casinos and horse racing are treated as "actionable claims" similar to lottery, betting and gambling, and subject to 28% GST on the full face value of bets1. The GST Council, made up of finance ministers from the Centre and states, approved the amendments at meetings in July and August, and rules for valuation by these companies were notified on September 61. Parliament passed the amendments to the Central GST and Integrated GST laws last month1.
The amendments to the Integrated GST Act make it mandatory for offshore online gaming platforms to register in India and pay 28% tax under domestic law, and provide for blocking access to overseas platforms that fail to comply with registration and tax payment provisions1.
The All India Gaming Federation wrote to Revenue Secretary Sanjay Malhotra noting that around 15 states have yet to change their State GST laws, and asked what GST treatment companies registered in those states should apply to deposits from players there1. The federation requested:
"reconsider these notifications and suspend them till 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 clarity and can accordingly align its processes and technology."
An AIGF spokesperson said the situation creates a conundrum where companies in states that have not amended their laws will have to charge CGST but not SGST, while in states that have amended, both are charged1. EY Tax Partner Saurabh Agarwal said online gaming companies will need a data repository to store customer information and other data required for GST compliance for a specified period1. KPMG Indirect Tax Head Abhishek Jain said ambiguity continues on matters including classification of supplies, time of supply and transition provisions1.
Separately, a show cause notice was sent to GamesKraft in September last year for alleged GST evasion of Rs 21,000 crore1. The Centre filed a Special Leave Petition in the Supreme Court in July, and while staying a High Court order the Supreme Court listed the matter for a next hearing on October 101.
What it means for players
For players in India, the tax is levied on the full face value of a bet rather than on the platform's commission, which is the basis operators use to set entry fees and stakes. The notification applies to online gaming, casinos and horse racing1. Because around 15 states had not amended their State GST laws at the time of the notification, the tax treatment of deposits from players in those states was unresolved, and the industry body asked the Centre for clarification1. Offshore platforms that do not register and pay face having access blocked1. The status of the show cause notices to Dream11 and Delta Corp, including any amounts, has not been reported1.
What happens next
A review of the implementation was proposed after six months, in April 20241. The Supreme Court listed the GamesKraft matter for a next hearing on October 101. The AIGF asked the Centre to suspend the notifications until all states pass their amendments1.
For background on how gambling is regulated across the region, see Gambling Laws in Asia: What Is Legal in 12 Jurisdictions and Can I Gamble in India?. For the wider online rules, see What India's Online Gaming Ban Means for Players.
