Online gaming: Understanding the tangled web of taxes
The taxability of online gaming services under goods and services tax (GST) has always been tricky, hinged on the distinction of whether they are classified as 'gambling' or 'skill-based' activities. While gambling activities such as betting and casino games attracted a 28 percent GST rate, skill-based games were taxed at a lower 18 percent rate.
Since 2018-19, the industry has made several representations to the GST Council seeking clarity on the so-called 'value of supply' for online gaming. The metric refers to the monetary worth of goods or services provided by a supplier to a recipient for consideration. It is a crucial concept in determining the GST liability on transactions. The online gaming industry has been filing returns since 2017, and the GST Council was aware that the industry was paying GST at the rate of 18 percent, industry officials said.
Court judgments clearly distinguished online skill gaming from betting and gambling. Therefore, the industry couldn't have classified itself as betting or gambling for the purpose of taxation.
