Govt may consider single tax rate for online gaming
The government may consider one single tax rate for online gaming as two different rates of 18% and 28% based on the distinction between so-called games of skill and games of chance are prone to misuse and litigation on account of the overlap between the two categories, two people aware of the thinking in government circles said.
A final decision on this matter will be taken by the GST Council, the apex decision-making body on matters of the indirect tax, they said on condition of anonymity. The council, a federal body, is chaired by the Union finance minister and has representations of state finance ministers.
The GST Council on May 24 constituted a group of ministers (GoM) to address issues related to the online gaming sector for taxation purposes. Initially, it was a seven-member ministerial panel under the chairmanship of Gujarat. Later, on June 11, the finance minister of Telangana was added in the group as the eighth member.
“The GoM is expected to submit its report to the council next month. The council may discuss all issues related to online gaming and take a considered view,” one of the people said. The GoM is to ascertain whether GST should be applicable only on the amount retained by the platform or also levied on the prize money.
The second person said it is often difficult to ascertain whether a game is purely one of skill or chance. “For example, rummy is a game of skill, but distribution of cards to players is nothing but chance. Secondly, unlike physical casinos, where the age of a player can be easily verified, in online gaming platforms, there is no effective way to check entry of kids as young as 13, which could be detrimental for the society. Hence, online gaming should be treated like lottery, a sin product, and attract the highest rate of 28%.”
“There is no objectively definable test or regulatory guideline or administrative forum to assess and determine if a game will be characterised as a game of skill or game of chance,” said a Niti Aayog discussion paper, quoting a report of the Sports Law and Policy Centre, a Bengaluru-based think tank focussing on sports law and policy.
Like lotteries, a single tax rate on online gaming is desirable to avoid litigation, the two people said. The GST Council in December 2019 levied a uniform 28% GST on both state-run and state-authorized lotteries. Earlier, state-run lotteries attracted 12% GST, while the levy on state-authorized lotteries was 28%. The lottery industry had been demanding a uniform GST rate of 12%.
