With the passage of the Bill to implement uniform 28 per cent Goods & Services Tax (GST) on full face value of real money online gaming, casinos and horse racing, experts hope for more clarity on the issue. However, they also apprehend more litigation.
Both Houses of Parliament on Friday gave their nod to two Bills to amend GST laws (Central Goods & Services Tax Act 2017 and Integrated Goods & Services Tax 2017) to implement the GST Council’s recommendations to implement 28 per cent levy on full face value. This will be implemented prospectively.
Clear definitions
Tanushree Roy, Director (Indirect Taxation) with Nangia Andersen India, said the amendment aims to provide clear definitions for terms such as “online gaming,” “online money gaming,” “specified actionable claim,” and “Virtual Digital Asset.” “By doing so, it brings much-needed clarity to the interpretation of these terms under GST and helps determine the taxability of activities such as casinos, horse racing, and online gaming under GST,” she said.
Saurabh Agarwal, Tax Partner with EY India, said the amendment essentially empowers the levy of GST on gaming portals involving monetary deposits (including virtual digital assets). The said amendments shall be a segue for notifying the rules of implementation including valuation aspects, and will give a definite line of sight for the booming gaming industry. However, “the debate as to whether the mere recharge of payment wallets implies a ‘supply’ would still continue,” he said.
Level-playing field
Experts noted the provision to bring a level-playing field between domestic and overseas platforms. According to Rajat Mohan, Senior Partner with AMRG & Associates, the regulations made it clear that foreign online gaming companies would receive the same treatment as their Indian counterparts and would need to register in India in order to pay GST.
Echoing the same sentiment, Rajat Bose, Partner with Shardul Amarchand Mangaldas & Co, said: “The provision to tax offshore online gaming companies through a simplified registration in India, and the stringent provisions to curb tax evasion by such players shows the seriousness of the government to enforce the regulation and collect the intended revenue from the industry.”
Now, the big question is the impact on litigations. “With these amendments, online gaming companies shall not expect any litigation in respect of the charge of GST prospectively. However, litigation for the old period would continue,” Mohan said.
According to Agrawal, the amendments would also help to defend past litigations. However, “one issue that remains unresolved is whether the deposit of money in an online gaming wallet constitutes a supply. This issue is likely to be the subject of interpretation in the time to come.”
Bose said the Government has stuck to its guns and not made a distinction between games of skill and games of chance. Further, the taxation is imposed on a higher amount that may not be actually recorded as revenue for a gaming company. “Given that the above is in the teeth of Supreme Court precedents and provisions of the GST laws, judicial challenges can be forecast in writ jurisdiction, in both the central and state legislation,” he said.