The goods and services tax (GST) receipts from the burgeoning online gaming industry fetched barely 2% of its estimated turnover of Rs 85,000 crore in FY23, revenue secretary Sanjay Malhotra said.
The finance ministry is looking at various options to enforce a 28% tax on foreign gaming platforms as well, he said, adding that non-compliant firms would be barred from providing such services to Indian residents.
Bajaj said the clarification, approved by the GST Council on Tuesday, that online gaming attracts 28% GST, will also apply to the cases which are ongoing in various courts.
“The 28% tax applies already to online gaming. If there was any doubt, we have now clarified that,” Malhotra told FE. The relevant amendment to GST laws will likely be introduced in the Monsoon session beginning on July 20, he said.
In FY23, the Centre collected Rs 1,700 crore GST from online gaming, Rs 300 crore from casinos and Rs 80 crore from horse racing activities.
Currently, online gaming pays an 18% tax on gross gaming revenue or GGR (platform fee).
“If GGR is 10%, then the tax becomes 1.8%. If GGR is between 10% and 20%, the industry is in the range of Rs 50,000 crore to Rs 85,000 crore,” Malhotra said.
“We could get (taxes) about ten times what we are getting (Rs 1,700 crore) if the volume continues,” he said.
Elaborating on the GST Council’s move to clarify the rates, the official said the fee for entry into sporting events or casinos or horse racing for entertainment is taxed at 28% even though no betting or gaming is involved. “So, from equity perspective also, this is what was weighing on the minds of the Council that they have taken this decision.”
On how to enforce GST collection of 28%, Malhotra said banks will be brought into the picture for the purpose. When the payment goes abroad, participants have to declare a purpose as to what for this payment is being made. If it is declared for gaming, the tax will be collected at that point. If declared wrongly, then the onus is on the players and penal consequences can follow.
“The responsibility can be passed to online gaming companies located abroad to make payment. If they also fail to do so, they are transgressing the law. Then, we are well within our rights to regulate them or suspend them till the time they open an Indian account or make payments to us. They can operate from outside but they have to make payments to us,” Malhotra said. The regulation of foreign platforms will happen through MeitY.
The official said the clarification would help in bringing clarity to even the cases which are ongoing in courts.
The Directorate-General of GST Intelligence (DGGI) has held that Bengaluru-based Gameskraft Technology’s (GTPL)’s platform offered betting and gambling activities worth Rs 77,000 crore between 2017 and June 30, 2022, which the company has contested in the high court, saying these were skill gaming activities and not betting. The court has quashed the show-cause tax notice. The revenue department will likely challenge it soon. DGGI had served a hefty Rs 21,000-crore tax notice to GTPL for not collecting GST on the entire consideration of betting at the rate of 28%.
“This law (28% tax on online gaming) is already there. It’s only that the courts have interpreted it in a particular way and we are interpreting it in another way,” Malhotra said.
“They (gaming firms) are saying that these are actionable claims not in the nature of betting and gambling and actionable claims not in the nature of betting gambling and lottery are not taxable today as per the GST law. We are saying that online gaming and horse racing are actionable claims for stakes, therefore taxable along with betting, gambling and lottery at 28%,” he added.