Government Experts Studying Single GST Rate for Gambling | Fusion - WeRIndia

GST is a sensitive subject in business circles, as sometimes there is a fine line between taxing for public benefits and stifling an industry. With the growing importance of online gaming and entertainment, legal definitions and taxation rates need to be clear and specific to avoid confusion and abuse. The GST Council is expected to simplify the regulatory framework in the gaming sector.

One Rate Suits All

After its introduction in 2017, GST has become a cornerstone element of public fiscal policy. The indirect levy on all products and services was intended to create a true Union market, above and beyond state and industry specifics. News that a significant sectors like online gaming is about to get a single GST rate are a further step in that direction.

Currently, there are two different rates – 18% and 28% – based on the distinction between games of skill and chance, often questioned and questionable. With many hybrid and overlapping genres, taxation rules for real-money games are open to interpretation, therefore also abuse and litigation.

Other aspects include the uniform treatment of offline gambling, online casino and mobile casino games, as well as the taxable turnover base. While authorities expect to impost GST on the entire gaming revenue, industry associations hope to get the levy limited to the commission retained, a.k.a. “rake fees”.

No Direct Effect on Personal Income but Businesses Remain Wary

Expert analysis on taxation regimes for gambling reveals that players should not expect their winnings to be affected. Top ranking games for money are all currently subjected to GST but prize pools are not, and game earnings are taxed after, as regular income.

However, serious thought should be given to the impacts that the indirect tax has on competitiveness and business climate in the gaming sector. The All India Gaming Federation (AIGF), an industry body uniting the leading gaming studios in the nation, insists that GST rates above 18% are against global best practices, as well as any business logic. Beyond a similar threshold, players may feel the entry fees are too high and turn to offshore or illegal gambling platforms. Desi gaming companies, in turn, will lose their competitiveness, as tech startups will suffer both double taxation and an outflow of consumers.

Skill or Chance, a Pragmatic Approach Is Needed

Ultimately, the differentiation between skill and chance classifies a game as entertainment or luxury. The Indian gaming community, however, expects a much clearer legislative interpretation at this point, and not only concerning tax rates.

Many of the nation’s favourite games online – rummy, poker, fantasy sports, to name a few – have repeatedly been declared games of skill and knowledge by High Courts and even the Supreme Court. Others, like legal state lotteries or family traditions like teen patti and andar bahar, are part of our culture, even when significantly determined by chance.

While the GST Council is not expected to clarify the game type division, it will at least provide a uniform fiscal framework for online and offline operations. A Group of Ministers was formed in late May, including the Union finance Minister and 7 other state ministers. The GoM is expected to have their final say by the end of the year.