The Centre Considers Uniform GST Rate on Online Gaming

Posted in Finance
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Several years after GST was introduced across the Union, its rates keep changing, even within a single economic sector. Online gaming, a booming industry, needs to have a single tax rate to plan for long-term stability and might just get it by the end of the year.

GST Council to Provide Legal Consistency for Online Platforms

Recent media reports quote Government sources insisting the time for a uniform GST rate on all gambling is near. Online games for money, unlike land-based facilities, still impose different levies according to skill and chance. Skill-based game revenues are taxed with 18% GST while games of chance incur 28%.

Working groups at the highest level have come to the conclusion that the approach leaves much room for interpretation, prompting litigation or fiscal abuse. Without a clear legal distinction between game types, businesses and millions of players would benefit from a single GST rate across the board. The matter is in the hands of Union finance ministers, constituted as GST Council for the

Popular gaming platforms offering online lottery, rummy, teen patti real money and other legal games for money are keen on the lower level charges. The All India Gaming Federation (AIGF) has recommended this on several occasions. However, gaming is considered a luxury activity and the higher tax rate might prevail. That scenario is less in favor of businesses but will greatly aid state and federal exchequers in times of hardship for the public finances.

Going Digital for Mutual Benefits

Highly-rated gaming industry research has shown that one of the nation’s favorites, State lotteries, have been dramatically influenced by GST introduction in 2017. With the increase in prices, small-time retailers experienced a sharp drop in sales, while there was a boom in black lottery markets, both paper-based and online.

The study also shows there is growing awareness of online lottery retail as a reliable option, even preferred by some users. As traditional paper-based lottery is not accessible in many states, consumers are likely to seek alternatives elsewhere, especially with many of the top European and American lotteries available for online purchase.

Considering the immense size of the market and its importance to state governments, it is a prime example of a real-money game which is better controlled and distributed by online and mobile platforms. They can also easily impose tools like spending limits, age verifications and provide more transparency for taxation purposes.

Clarifying the GST rate for all legal gambling outlets can usher in the digital transition and make life easier for gaming businesses, players and the government.

Decision by the End of the Year

The same media sources claim that a final decision should be reached within a couple of months. It is the prerogative of the GST Council, a decision making body composed of the Union and State finance ministers. A working group had already been assembled in May, discussing the implications of the indirect tax on public revenues but also on the business climate.

  • A question still remains – whether GST should be collected on the full gaming turnover or only on the platform commission, known sometimes as “rake fee”. The position will also impact levies on prize money for players.
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