GST Council Meeting on July 11, 2023, to Address Taxation of Online Gaming
The Goods and Services Tax (GST) Council has announced its upcoming meeting on July 11, 2023, which will be held at the Vigyan Bhawan in New Delhi. The council, chaired by Union Finance Minister Nirmala Sitharaman, will convene for its 50th meeting to address various tax-related matters. A significant topic on the agenda is the taxability issue surrounding online gaming, a matter that has been pending for some time.
Divergent Views on Taxation of Online Gaming
Within the GST Council, there are contrasting views regarding the tax treatment of online gaming. Some states argue against categorizing it similarly to betting and gambling, while emphasizing that tax rates should not be overly burdensome to avoid discouraging technology-driven games. This disparity in perspectives has led to prolonged deliberations and the referral of the matter back to the council.
Committee Recommendations and Pending Agreement
Previously, the GST Council had assigned a committee of state ministers, led by Meghalaya Chief Minister Conrad Sangma, to examine the taxability of online gaming. However, the committee was unable to reach a consensus and submitted their report in December. The report proposed a 28 percent tax rate on the total value, including winnings. Notably, there remains uncertainty regarding whether the tax should be based on the net amount (after deducting prize money) or the gross gaming revenue (GGR).
Implications of Gross Gaming Revenue Taxation
The concept of Gross Gaming Revenue (GGR) has been discussed extensively within the committee. GGR represents the total amount collected by casinos and online gaming companies before distributing winnings to players. However, imposing GST based on GGR would create a significant discrepancy in tax treatment compared to lotteries, which are taxed based on face value. This issue raises concerns about the potential financial implications and fairness of the proposed taxation model.
Goa’s Objection to Casino Taxation
In the realm of casinos, an empowered group of ministers previously recommended a 28 percent GST rate on the full face value of chips or coins purchased by players. These chips can also be used for non-gaming purposes, such as purchasing food and beverages. However, the state of Goa objected to this proposal, further complicating the decision-making process within the GST Council.
The upcoming GST Council meeting on July 11, 2023, is expected to shed light on the long-standing issue of online gaming taxation. As the council members convene, the contrasting viewpoints and unresolved matters surrounding tax rates and the method of taxation based on either net amount or GGR will be under discussion. The decisions made during this meeting will have significant implications for the online gaming industry and its players, as well as shape the future of tax policy in this rapidly evolving sector.
