The Chairman of the Central Board of Indirect Taxes and Customs (CBIC), Sanjay Agarwal, has announced that India is set to impose a 28% Goods and Services Tax (GST) rate on online gaming starting October 1.
The move comes with the consensus of all Indian states and following the recent passage of amendments to the GST laws in the Lok Sabha. Players must now pay GST on the full value of their initial purchase of in-game currency. Simply put, an individual will pay Rs 28 out of the first Rs 100 spent in the game, which is 28%.
Under the GST regime, online games are differentiated between skill and chance. A game of skill requires the expertise and experience of the player, while a game of chance is simply betting or gambling, with the risk of losing. In India, poker, rummy and horse racing betting are considered games of skill, while blackjack, roulette, sports betting and similar games of chance. However, in the case of tax, the same rates will apply equally to both types of games.
This 28% GST is not applicable on your winnings. You have to pay GST while depositing money on the gaming or betting platform. You pay 30% TDS on your winnings.
Players have been told that the entire tax will be collected only at the entry level and the tax will not be applied to winnings that are further used in the game. However, the tax collected will not be refunded in the event that players receive a cashback or refund.
A popular fantasy game company has found a workaround – they provide a bonus code that gives users exactly a discount on their tax amount (28%). Creative solutions like these could be the answer for the continued growth of the online real money gaming market in India. Most offshore casino sites already give really good online casino welcome bonuses to new players. But when GST is applied to their deposits as well (which isn’t happening yet), they can start giving out extra bonuses and promo codes to incentivize the customer.
Industry insiders are understandably unhappy about this. Experts argue that skill-based games should not be grouped with betting or gambling. Some say this will significantly reduce the expansion of gaming companies. As of now, offshore betting sites and online casinos do not have to pay 28% GST as the online gambling market in India remains unregulated. But recently there has been talk of collecting taxes from offshore betting companies, and that could be in the works soon.
While it is not 100% illegal to play on offshore betting sites that are licensed outside of India, it is not considered the safest or smartest option. Because there is no legal remedy in case of fraudulent activities. If the market had been regulated, things would have been very different.
Categories: Trends
Source: HIS Education