The Group of Ministers (GoM) constituted by the GST Council on May 24 to look into the twin issues of classification and valuation of the online gaming, race course and casinos, is expected to submit its report to the GST Council by the next month. The final decision will be taken by the council in its next meeting thereafter.
On the GST rate aspect, the GoM is likely to recommend a single GST rate for all sorts of games and that too in the highest rate slab of 28%. The thought here this is that a single rate structure will put an end to the confusion on classification of games - whether a game is a 'Game of Skill' (currently taxed at 18%) or a 'Game of Chance' (currently taxed at 28%). The industry has represented for a lower 18% GST rate, however, it seems the GST Council is keen to bring all online games at the highest tax rate slab of 28%.
The other important issue, that the GoM is looking into, is the valuation aspect of online games. Currently the industry pays the GST on the 'Platform fees' charged by the gaming platform, from the pool of money collected from players taking part in the game. Whereas, the department had issued notices to the gaming platforms demanding tax on the entire pool money. The gaming platform's argument is that the money pooled in by the players is like actionable claims and thus is neither a supply of goods nor a supply of service as per the Entry 6 of Schedule III to the CGST Act. This view was also argued before the Bombay High Court and the high court had accepted the same. But the Union of India filed a review petition against this judgement, which is pending as of now.
If indeed the GST Council intends to tax the entire pool money under GST, then an exception would have to be created to the actionable claims aspect under Schedule III to the CGST Act, by way of an amendment to the GST Act. Given that the matter is already pending before the courts, it would have to be seen how the GoM will make a recommendation on the way forward on this aspect.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.