GST on Online Gaming - A Detailed Discussion
Online gaming as its name suggests means playing a game on the internet. The term “online gaming” is also defined in section 2 (80A) of CGST Act 2017 which states that "online gaming" means offering of a game on the internet or an electronic network and includes online money gaming. Further, as per sub section 80B of section 2 of CGST Act 2017 the term "online money gaming" means online gaming in which players pay or deposit money or money's worth, including virtual digital assets, in the expectation of winning money or money's worth, including virtual digital assets, in any event including game, scheme, competition or any other activity or process, whether or not its outcome or performance is based on skill, chance or both and whether the same is permissible or otherwise under any other law for the time being in force. In this article we will discuss the GST implications on Online Gaming, Casinos and Horse Racing.
Leviability of GST:
As we know that GST is leviable on the supply of goods or service or both. The
definition of "goods" given under
section 2 (52) of CGST Act 2017 includes
actionable claims. In respect of the actionable claims it is important to note
that the actionable claims other than specified actionable claims, would not be
considered as the supply of goods or services as per para 6 of
Schedule III of
CGST Act. Further, the term “specified actionable claim” is also defined under
section 2(102A) of CGST Act which states that "specified actionable claim" means
the actionable claim involved in or by way of-
(i)
betting;
(ii)
casinos;
(iii)
gambling;
(iv) horse
racing;
(v)
lottery; or
(vi)
online money gaming.
Thus from the above it is clear that “Online money gaming” is a “specified actionable claim” under GST, which is not covered under para 6 of Schedule III. Accordingly, GST would be applicable on the supply of online money gaming. As far as the rate of GST is concerned, the specified actionable claim is covered under serial number 227A of Schedule IV of the Notification No. 01/2017 Central Tax (Rate), hence the GST @ 28% would be applicable on the said supply.
Value of supply in case of online gaming including online money gaming:
Till now we have discussed that GST @ 28 % is leviable on the supply of online money gaming. Now the question arises what would be the value of supply of online gaming. Section 15 of CGST Act 2017 along with relevant CGST rules contains the provisions relating to the valuation of supply. As per Rule 31B of CGST Rules 2017 the value of supply of online gaming shall be the total amount paid or payable to or deposited with the supplier by way of money or money’s worth, including virtual digital assets, by or on behalf of the player:
Provided that any amount returned or refunded by the supplier to the player for any reasons whatsoever, including player not using the amount paid or deposited with the supplier for participating in any event, shall not be deductible from the value of supply of online money gaming.
Details to be mentioned in Tax invoice:
Rule 46 of CGST Rules 2017
prescribes the particulars to be mentioned on the tax invoice issued by the
supplier. The clause (f) of Rule 46 states that the tax invoice should contain
name and address of the recipient and the address of delivery, along with states
name and state code, if such recipient is un-registered and where the value of
the taxable supply is less than fifty thousand rupees and the recipient requests
that such details be recorded in the tax invoice.
However, the proviso to the above clause (f) states that in cases involving supply of online money gaming or in cases where any taxable service is supplied by or through ECO or by a supplier of OIDAR to a recipient who is unregistered, irrespective of the value of such supply, a tax invoice shall contain the name of the state of the recipient and the same shall be deemed to be the address on record of the recipient.
Thus from the above it is clear that in case of supply of online money gaming to an unregistered person a tax invoice shall contain the recipient’s state name and the same shall be deemed to be the address on record of the recipient.
Registration Requirements:
As we know that as per section 22 of CGST Act 2017 the supplier shall be liable for the registration if his aggregate turnover in a financial year exceeds the threshold limit. However, section 24 of CGST Act 2017 contains the list of the persons who shall be compulsory required to be registered under GST irrespective of their turnover. As per clause (xia) of section 24, every person supplying online money gaming from a place outside India to a person in India.
Officers empowered to grant registration:
The Central Government vide Notification No. 04/2023- Integrated Tax had
notified the Principal Commissioner of Central Tax, Bengaluru West and all the
officers subordinate to him as the officers empowered to grant registration in
case of supply of online money gaming provided by a person located in non-taxable
territory and received by a person in India.
IGST to be charged on invoice:
The supplier of online money gaming not located in the taxable territory shall
be liable to pay integrated tax in respect of the supply of online money gaming
made by him to a person in the taxable territory. If said supplier has a
representative located in the taxable territory who is representing him for any
purpose, then said representative shall get registered himself and pay the
integrated tax on behalf of the supplier. If such supplier does not have a
physical presence or does not have a representative for any purpose in the
taxable territory, he shall appoint a person in the taxable territory for the
purpose of paying integrated tax and such person shall be liable for payment of
such tax.
Form and
manner of submission of return:
Every
registered person providing online money gaming from a place outside India to a
person in India shall file return in FORM GSTR-5A on or before the twentieth day
of the month succeeding the calendar month or part thereof.
Relevant Judgements:
1. M/s Gameskraft Technologies Private Limited [2023(05)LCX0002]:
An SCN was
issued to M/s Gameskraft Technologies for demanding GST of approx Rs. 21,000
crores in respect of the games played for stakes on the online platform of
Gameskraft. Rummy constituted about 96% of the total revenues of Gameskraft. The
department raised the GST demand treating the online games played with stakes as
betting and gambling and sought tax at the rate of 28% on the entire revenue of
Gameskraft. Gameskraft challenged this SCN before the Hon’ble Karnataka High
Court.
Relying on the various decisions of the Hon’ble High Courts and Hon’ble Supreme Courts, the HC held that rummy is a ‘game of skill’ and cannot be equated with lotteries, betting and gambling. The Ld. Single Judge held that rummy whether played online or offline, continues to be a game of skill. It was held that Entry 6 of Schedule III covers actionable claims in respect of games of skill and only excludes actionable claims in respect of lottery, betting and gambling. Since games of skill such as rummy are not betting or gambling, they are not taxable under the CGST Act.
Further, the HC held that in a game of mixed chance and skill, if the game is predominantly and substantially a game of skill, it would not be gambling, and that other online/digital/electronic games which are also substantially or preponderantly games of skill and not of chance, are not gambling.
2. In Gurdeep Singh Sachar vs Union of India and Ors, [2019(04)LCX0035] the Bombay High Court ruled that GST is not applicable on the player’s entire deposit, but only on the consideration collected for the supply of goods or services within the platform.
Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.