GST on online gaming: Centre argues before SC that full value of bets should be taxed
The Centre has told the Supreme Court on August 5 while presenting rejoinders to the arguments presented by online gaming companies that the entire stake amount, or the ‘full face value of bet’, should be considered for taxation, as without stakes placed, the gaming entities would never supply any ‘actionable claim’, in this case betting and gambling.
The Centre has told the Supreme Court on August 5 while presenting rejoinders to the arguments presented by online gaming companies that the entire stake amount, or the ‘full face value of bet’, should be considered for taxation, as without stakes placed, the gaming entities would never supply any ‘actionable claim’, in this case betting and gambling.
The 'full face value' of bets refers to the entire amount of money (or its equivalent in chips or tokens) that a player wagers online regardless of whether it's a game of skill or chance. Actual transaction value means revenue earned by the online gaming platform for providing its services, essentially as commission or service fee that the platform takes from the total money involved in a game.
In October 2023, the central government had issued a notification ‘clarifying’ that a 28% GST applicable on online gaming is on the full-face value of bets. Since then, this has been a contentious point for the gaming industry as it significantly increases tax burden compared to the previous model. For instance, if you deposit Rs 1,000 with GST applied at 28 percent on the full-face value of the deposit, then Rs 280 is the tax outgo, leaving only Rs 720 for gameplay.
Online gaming companies have said that the GST should only be levied on ‘actual transaction value’ (their commission/revenue) as that is the true ‘supply of service’ they provide.
In a written rejoinder, seen by Moneycontrol, Additional Solicitor General (ASG) N Venkatraman told the apex court, “For a player to enter into a game, it is condition precedent as per the terms and conditions that the stake amount is first paid by the player. This is because, it is the stake amount which would determine who the player would play against since the algorithm is designed in such a way that a player would play against another who has decided to stake the same amount.”
ASG Venkatraman added, “The moment stakes are placed, the player would become the recipient of an actionable claim supplied by the online gaming companies.”
As placing the stake is the first step in the transaction, the stake amount is undoubtedly in respect of and for the inducement of the underlying supply of goods, said the ASG.
