GST Council, Led by Finance Minister Sitharaman, Convenes to Address Definition and 28% Tax on Online Gaming
The upcoming GST Council meeting is set to provide clarity on the classification of online gaming for taxation purposes. The council will address the crucial question of whether games of skill or chance will be encompassed within the definition of online gaming for tax imposition. This decision is eagerly awaited and is expected to have significant implications for the online gaming industry in India.
Finance Minister Nirmala Sitharaman-led Goods and Services Tax (GST) Council is scheduled to convene on Wednesday to address key issues related to online gaming taxation. The council aims to clarify the definition of online gaming and determine how the 28% tax rate will be levied on the industry.
During the previous meeting held on July 11, the council decided to impose a 28% GST on online gaming, horse racing, and casinos based on the full value. To bring online gaming and horse racing under taxable actionable claims, the government is expected to introduce amendments to the GST Act during the ongoing Monsoon Session of the Parliament.
However, the 28% taxation has raised concerns within the online gaming industry. Industry experts and stakeholders have highlighted the need for a clear distinction between skill-based games and games of chance, such as betting and gambling. They argue that a lower tax rate, such as 18%, would be more appropriate to support the growth of the industry, including startups in this sector.
Critics of the 28% tax rate believe that it blurs the line between skill gaming and gambling, contrary to established legal precedents. They contend that taxing the entire value of bets adversely affects customers, as they receive reduced playable value, potentially hindering the industry's progress.
Industry professionals hope that the GST Council will consider feedback from stakeholders during the meeting. Although a complete rollback of the tax seems unlikely, there is optimism that the council may offer some relief to the Indian online gaming startup ecosystem. Suggestions for a reduced GST rate, distinguishing between skill-based and chance-based games, and adopting gross gaming revenue as a valuation mechanism will be presented during the discussions.
The upcoming council meeting holds significant importance for the online gaming sector, and industry representatives are keen to advocate for a more favorable taxation framework that fosters growth and innovation in the industry.
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