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Finance ministry to impose 28 per cent GST on online gaming from October 1

E-gaming companies flag that since many states are yet to pass amendments in their respective State GST (SGST) laws, this notification by the union government in CGST and IGST laws will create confusion

Our Special Correspondent New Delhi Published 01.10.23, 08:27 AM
Representational image.

Representational image. File photo

Confusion mars the implementation of the 28 per cent GST from October 1 as some states are yet to notify the online gaming legislation.

The finance ministry late on Friday notified October 1 as the appointed date for the amended provisions in the Central GST and Integrated GST laws to come into effect.


E-gaming companies, however, flagged that since many states are yet to pass amendments in their respective state GST (SGST) laws, this notification by the Union government in CGST and IGST laws will create confusion.

From October 1, online gaming companies will be charged 28 per cent GST on full value of bets, while offshore platforms too would be required to have GST registration to operate in India.

The All India Gaming Federation (AIGF) spokesperson said the central government has notified the applicability of the new GST regime for online gaming from October 1. However, it seems that multiple states have not passed the amendment to their State GST Act.

“This is creating a conundrum where the online gaming companies in such states will have to charge CGST but not SGST. At the same time in states where the amendment has been done, both CGST and SGST will be charged. In this light the industry is hoping that the government will take cognizance of the situation and allow reasonable time to the industry for transition,” the spokesperson added.

Abhishek Jain, indirect tax head and partner, KPMG, said: “With the said provisions being made effective tomorrow, industry needs to ensure appropriate readiness for adoption of the revised taxation. While most provisions for the revised taxability have been notified, ambiguity on certain matters continue, including classification of the supplies made, time of supply, transition provisions.”

Sanjeev Sachdeva, partner, Luthra and Luthra Law Offices India, said: “The amendments will not come into force in those states which have yet to bring these into force. CGST will, however, apply even in those states.

“This is an unprecedented situation. It needs to be remembered, however, that the apex court in the Mohit Minerals case held that recommendations of the GST Council are not binding on the states, which retain their autonomy on giving effect to the Council’s recommendations.”

“If the state governments have not yet notified the rules, there will be uncertainty about the implementation of these rules and taxpayers may challenge in case they are asked to pay taxes on the same,” S.R. Patnaik, partner and head — taxation, Cyril Amarchand Mangaldas, said.

“However, the tax department could turn around and say that the taxpayers were totally aware because the central rules have already been notified and they cannot take shelter in the fact that rules have not been notified, which is a mere formality now!”

Abhishek Malhotra, managing partner of TMT Law Practice, said: “It is a wait-and-watch situation. It is possible that the ordinance route may be taken by the states to meet the deadline. If all states do not implement a law/amendment, it won’t be workable and hence will go against that spirit.

“Confusion amongst industry players as to what the legal position is with regard to the applicability of GST, will lead to a further impact on the sector that is already beset with confusion, possible liability, and a huge compliance burden.”

Sources indicated that several states where the gaming industry is present have passed the legislation or taken the ordinance route like Karnataka. Other states are likely to come up with an ordinance in the coming days, reasoning out why the Centre has gone ahead with the notification.

According to the changes to the Central GST Act, online gaming, casinos and horse racing will henceforth be treated as “actionable claims” similar to lottery, betting and gambling and subject to 28 per cent Goods and Services Tax (GST) on full face value of bets.

The amendments to Integrated GST (IGST) Act makes it mandatory for offshore online gaming platforms to take registration in India and pay 28 per cent tax in accordance with the domestic law.

The amendments will also provide for blocking access to online gaming platforms located overseas in case of failure to comply with registration and tax payment provisions.

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