The GST Council is likely to meet on August 2 to discuss ways in which clarity can be provided on the legal amendments required as well as on the tax treatment following the decision to levy a 28 percent tax on the face value of real-money games, according to two state government officials.
The meeting, which will reportedly be held via video-conferencing, comes less than a month after the GST Council caused an uproar on July 11 by deciding to levy a 28 percent tax on the full value of the money paid by users to play skill-based on online games in a uniform manner with no distinction made between game of skill and chance.
All online gaming platforms currently pay 18 percent GST on the platform fees, also known as the Gross Gaming Revenue (GGR), and not on the full value of the transaction, also known as the Contest Entry Amount (CEA). According to the Internet and Mobile Association of India (IAMAI), the decision to levy 28 percent tax “will result in an approximate 1,000 percent increase in GST on the industry and will cause irreversible damage to the $2.5 billion investments in the Indian online gaming startup ecosystem and lead to a complete halt on any prospective FDI.”
While online gaming companies have made a representation to the finance ministry seeking a review of the decision, a roll-back of the same is unlikely.
At the August 2 meeting, there are no plans to reconsider the decision, one of the officials told Moneycontrol.
“It will be a short agenda, mostly to discuss the taxation treatment on online gaming in respect to the schedule 3 of the Central GST Act which articulates how lottery, betting, and gambling is defined and taxed under GST,” the source said.
In an interview to Moneycontrol on July 13, Revenue Secretary Sanjay Malhotra said that tax authorities have to follow the principle of equity and therefore if online gaming is treated as betting or gambling, and if betting, gambling, and lottery are taxed at 28 percent, then online gaming has to be treated the same way.
“Playing for stakes based on an outcome irrespective of the nature of the game has always been taxed on the basis of face value under the GST laws. In the light of above developments, a clarificatory amendment is now to be brought making taxation of online gaming more explicit,” Malhotra had said.