India's 28% tax on online gaming
September 27, 2023
India's online gaming industry is currently valued at approximately $1.5 billion. In an announcement made by Finance Minister Nirmala Sitharaman in August, a 28% tax on online gaming will be implemented starting from October 1. The valuation of the supply of online gaming and casinos for GST levy will be based on the amount paid or deposited with the supplier, excluding the winning amount in the bet.
Tax Explanation with Example
To further clarify the tax, the finance minister provided an example. If a bet of ₹1,000 is placed and the player wins ₹300, then if the player places another bet of ₹1,300, GST will not be levied on the winning amount.
GST Council Decision
In August, the GST Council agreed to review the levy six months after its implementation but maintained the decision to impose the tax. The Council also established valuation rules for the levy, stating that online gaming, casinos, and horse racing would be taxed based on the full-face value of the placed bets.
Finance Minister's Statement
Finance Minister Nirmala Sitharaman emphasized that the intention behind this tax is not to harm the industry, but rather to close a loophole and eliminate any distinction between a "game of skill" and a "game of chance."
Requirements for Offshore Companies
The Indian government has mandated offshore online gaming companies operating in the country to register their business locally. Additionally, they may appoint a representative to pay tax on customer funds. Failure to comply with these regulations will result in overseas online gaming companies being blocked, as per the GST Council's directive.