Several top law firms representing the gaming industry, including TMT Law Practices and Nishith Desai Associates, have written to the Prime Minister’s Office (PMO) urging the GST Council to maintain the current taxation regime for the online gaming industry.
At present, online skill gaming operators pay GST at the rate of 18 per cent on the platform or a service fee deducted from the total entry fee paid by players. The GST Council is considering increasing this rate to 28 per cent calculated over the total amount of money paid by players.
In response, the law firms have argued that increasing the GST rate to 28 per cent of the winnings pool plus commission fees on skill-based games will essentially bring skill-based games on par with games of chance. Over the years, several courts, including the Supreme Court of India, have ruled that skill-based games must not be treated the same way as lottery, betting, or gambling. This distinction is also reflected in the IT Rules, 2023.
The Bombay High Court has ruled that these companies should be subject to an 18 per cent tax rate under the GST Act. Applying a uniform rate of 28 per cent for games of skill and chance would violate the equality doctrine enshrined in Article 14 of the Constitution of India.
The law firms have pointed out that “Rule 31A of the CGST Rules, 2018 determines the value of supply for the calculation of GST in the case of lottery, betting, gambling, and horse racing. It imposes a 28 per cent GST rate on the amount deposited or bet on the result of the service. Games of skill that do not fall under the scope of Rule 31A should be exempt from the provision and not subject to GST on the entire amount deposited by users.”