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GST Council: 28% GST To Be Levied On Face Value Of Deposits

The 51st Goods and Service Tax (GST) Council meeting was held today, in which the council upheld that they would levy a 28% GST on the face value of the deposits made by players. 

While clarifying the new amendment, the Finance Minister of India, Nirmala Sitharaman, said, “Valuation of supply of online gaming and supply of actionable claims in casinos, the council recommended that the supply of online gaming and supply of actionable claims in casinos may be done based on the amount paid, or payable, or payable to, or deposited to the supplier on behalf of the player, excluding the amount entered into games, bets, out of winnings of previous games and bets, and not on the value of the bets placed.”

Nirmala Sitharaman Clarifies On ‘Prospective’ Levy Of 28% GST

What Does 28% GST On Face Value Of Online Gaming Mean?

To simplify this, let’s understand it with an example. Say an operator charges ₹100 as the entry fee, out of which ₹20 is deducted, and ₹80 is added to the prize pool. This ₹20 is the gross gaming revenue (GGR) for the brands. So far, the operators needed to pay a tax of 18% on GGR, which was ₹3.6.

However, the new announcement stated that companies would have to pay 28% on face value, that is 28% on ₹100, which is ₹28. But that’s not all. Currently, a TDS of 30% is already imposed on the final winnings of the user, which means the 28% GST on face value just adds to the tax burden of the players as well.

Key Highlights Of The GST Council Decision:

• 28% GST will be levied on online gaming companies on total funds deposited to play online games and not on every bet made by a player. Similarly, the tax will be imposed at the entry-level deposit. 
• The tax will be implemented tentatively from 1st October 2023. The council will review the decision after six months from the date of implementation. 
• Specific provisions are to be included in the legal amendments for the registration of offshore online gaming companies in the country. 
• The Finance Minister of Delhi strongly suggested that the 28% GST on online gaming be reviewed. States like Goa and Sikkim supported the decision of increase in tax. However, they argued that the increase be on GGR and not the face value. 

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