GST on Online Gaming Should be Increased

Nearly eight out of ten respondents, according to a Local Circles online survey, want the goods and services tax (GST) rate on online gambling, casinos, and horse racing to be at least 28 percent. Casino games and online gaming both currently have an 18% GST. 27 percent of respondents preferred a tax slab of more than 50%, compared to 7% who preferred a 40% tax slab. Only 1% of respondents thought that online gambling, casinos, and horse racing should be subject to GST, with 6 % disagreeing.

The GST Council, which is composed of a GoM led by the chief minister of Meghalaya, Congrad Sangma, has agreed to raise the GST rate on gaming-related products sold in casinos, racetracks, and online to 28%. However, ultimate confirmation of this must come from the GST council. The tax will be assessed on the complete face value or bet amount rather than the total transaction value, according to a decision by the committee of ministers. The game money or net commissions (revenues) that are paid to gaming businesses are included in the overall transaction value.

The position of the law with regard to the legality of online fantasy gaming is a crucial component of gaming law in the modern day as more and more fantasy gaming mobile applications and websites become big players in the online gaming and sports entertainment industry. Whether a game is primarily a “game of skill” or a “game of chance” is one of the most important factors in assessing whether it is allowed to play fantasy games online.
Different courts have adopted varying positions on how to address internet games because there is no common code regarding gaming. The GST authorities have, in the meantime, sent notices to several industry participants proposing to reclaim additional GST as a result of the valuation dispute.

“A centralised regulatory body or framework to overlook the online gaming industry would help to ensure uniformity in application of law across the states, ” according to Adarsh Somani ( partner) and Sahil Kothari (principal associate) at Economic Laws Practice.

The online gaming sector, which creates games like e-sports, rummy, poker, chess, and fantasy games, has been advocating for a GST maximum of less than 18%. In contrast to online gaming, 60% of individuals prefer a higher price for cryptocurrencies and a GST rate of at least 28% for them. A 28 percent tax on digital currency is also being considered by the GST council. The Good and Services Tax (GST) should be increased from 5 to 7-8 percent and from 18 to 20 percent, according to more than seven in ten Americans.

“Given the high inflation and 7 in 10 households in the country facing a squeeze, any change in the 5% rate structure to 7-8% will have a direct impact on household budgets and hence majority of the household consumers are explicitly against such an increase. Similarly, in the case of services according to people, the 18% GST rate leads to high evasion where most small and even mid-size contractors do not issue a GST invoice and take payments in cash or in bank accounts of family members. By increasing tax on services from 18% to 20% there is a high risk that most people will likely avoid GST invoices with largely only leaving businesses paying the higher rate of 20%,” said the survey.

Seventy one per cent of those surveyed were also against raising the GST of household items such as shampoos, hair oil, toothpaste etc.
Majority of the households are instead seeking a relief in GST rates given the high levels of inflation with 70% reporting an over 10% increase in monthly costs in May.