The Goods and Services Tax (GST) Council is scheduled to convene its 50th meeting on July 11, 2023, at the prestigious Vigyan Bhawan in New Delhi. Led by Union Finance Minister Nirmala Sitharaman, this crucial gathering aims to tackle the issue of taxability surrounding online gaming.
The GST Council, in a tweet on Thursday, declared, “The 50th meeting of the GST Council will be held on 11th July 2023 at Vigyan Bhawan, New Delhi.”
According to a recent report by Business Standard, certain states express reluctance in treating online gaming on par with betting and gambling activities. Additionally, they advocate for moderate tax rates, citing concerns that high taxation would discourage technology-driven games.
The taxation of online gaming companies has remained unresolved for some time. To address this issue, the GST Council previously assigned a committee of state ministers, led by Meghalaya Chief Minister Conrad Sangma. However, despite their efforts, the committee failed to reach a consensus and submitted its report in December. The committee’s initial stance proposed a tax rate of 28 per cent on the total value, including winnings. As a result, the matter was referred back to the GST Council.
Sources suggest that the state panel has reached a consensus on imposing a 28 per cent tax on the supply of actionable claims. However, the precise method of taxation, whether based on the net amount (after deducting prize money) or the gross gaming revenue (GGR), remains undetermined.
Gross gaming revenue refers to the total amount collected by casinos and online gaming companies before distributing winnings to players. During discussions, the panel explored various proposals, including taxing based on the face value and gross revenue.
It has been argued that taxing GGR would have significant financial implications. Imposing GST on online gaming or casinos based on GGR would create a noticeable disparity in tax treatment compared to lotteries, which are taxed based on face value.
Previously, an empowered group of ministers recommended a 28 per cent GST rate on the full face value of chips or coins purchased by players, along with the option to utilize them for food and beverage purchases. However, the proposal faced objections from Goa.
The upcoming GST Council meeting holds substantial importance as it aims to address the taxability of online gaming. With varying opinions and unresolved issues, finding a consensus on the taxation framework poses a significant challenge for the council. The outcome of this meeting will have far-reaching implications for the online gaming industry and the overall tax landscape.
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