New tax regime for online money games kicks in

New Delhi: The new 28% Goods and Services Tax (GST) on online money games, casinos and horse racing kicked in on Sunday, with the central government issuing orders on the norms to be followed for the portion of taxes to be collected by the centre and the Union Territories.

Some states are still in the process of notifying the legislative changes for the portion of the tax they will collect. The new regime kicks in amid intense litigation, with the Supreme Court last month issuing a stay order on a Karnataka High Court decision that favoured an online gaming company.

The finance ministry’s orders seek to implement the GST Council 's decision to ensure that “the chance to win” – or in legal parlance, “actionable claims” – supplied by online gaming platforms, horse-racing clubs and casinos is subject to 28% GST. Gaming companies have been resisting the new tax regime saying it will make the industry unviable.

The centre’s notifications cover aspects such as the date of implementation, the value of the taxable service, a GST return form and import of gaming as a service. The new regime makes a distinction between casual online games and those involving a wager. Only the actionable claims offered by 'online money games' are subject to 28% tax on the full value of the deposits made to the platform. Online money games are those in which the player deposits an amount in the expectation of winning some amount in a game or event. The amendments do not affect the tax on casual online gaming, in which no real money or betting is involved.

Experts said gaming platforms will have to prepare to embrace the revised taxation regime. While most provisions for the revised tax regime have been notified, ambiguity on certain matters continues, including classification of the supplies made, time of supply, and transition provisions, said Abhishek Jain, indirect tax head and tax partner at KPMG.

Gaming firms offering online money gaming from a place outside India to a person in India are required to be registered from 1 October, explained Saurabh Agarwal, tax partner at EY. "In case any amount is returned or refunded to the player or returned due to non-use of such amount, it will not be deductible from the value of supply," said Agarwal.