Foreign online money gaming firms will have to register with the goods and services tax (GST) authorities here or appoint an agent in India to comply with the 28% tax on turnover. This is one of the proposals to be considered by the GST Council as it meets via video conferencing on August 2.
The non-compliant among such firms would be barred from providing such services to Indian residents under the Information Technology Act, according to the agenda for the meeting reviewed by FE.
As per industry estimate, the turnover of foreign gaming firms in India was around $10 billion in FY23.
The GST Council, in its July 11 meeting, recommended that the actionable claims supplied in casinos, race courses and online gaming be taxed at the rate of 28% on full face value irrespective of whether the activities are games of skill or chance. The online gaming industry had been collecting tax at 18% on the platform fee, but the government is maintaining that this was never meant to be so.
To determine the value of supply in the case of online gaming, the Council will consider amending the Central GST Act to state that the value of the supply of online gaming (including actionable claims) would be total amount paid to the supplier by way of money or virtual digital assets by a player. Similarly, in the case of casinos, the value of the supply of actionable claims would be the total amount paid by the player for the purchase of the tokens, chips, coins or tickets.
Sources said the Council may also consider whether to offer tax rebates for winning amounts redeployed in the gaming platform.
“On account of taxation of redeployed player winnings, the same money will get taxed repeatedly resulting in a scenario where over 50-70% of every rupee will go towards GST, thereby making the online real money skill gaming business unviable,” a group of 30 investors, including Kalaari Capital, Peak XV, Tiger Global, said in their recent letter to Prime Minister Narendra Modi.
The Council will also consider inserting a definition in the GST law. It will likely define online money gaming as one in which players pay or deposit money or money’s worth including virtual digital assets (VDAs) in the expectation of winning money or VDAs, whether or not its outcome or performance is based on skill, chance or both and, whether the same is permissible or otherwise under any law for the time being in force.
According to amendments proposed to GST laws, a person supplying online money gaming from a place outside India to a person in the country will have to compulsorily register.
The foreign supplier of online money gaming are required to take a single registration under the Simplified Registration Scheme. In cases where the foreign supplier does not have a physical presence or does not have a representative, the firm would have appoint a person in India for the purpose of paying GST.
Some of the big overseas online gaming players include Parimatch, betway, Leon bet, andar bahar, jhandi munda, 1xbet, fun88, yolo247 and bet365.
“The regulatory conditions and taxation that affect the competitiveness of the services, must be balanced and proportionate. Otherwise, the whole purpose of the regulation will be defeated, bringing about ineffectiveness in terms of accomplishment of public policy objectives, enforcement, supervision, tax returns and, ultimately, not only consumer appeal but also consumer protection,” Juan Espinosa and Carlos Hernández, founding partners, Silverback Advocacy, said.