Online Gaming May Have a Single GST Rate
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In May 2021, the GST Council had constituted a group of ministers (GoM) to address issues relating to the taxation of online gaming. The government is considering levying a single tax rate instead of 18% and 28% GST currently in force, depending on whether the games are based on skill or chance. With two different rates, there are chances of misuse and litigation.

A person familiar with the matter said it is sometimes difficult to ascertain whether a game is a skill or chance. For example, even though rummy is a game of skill, the distribution of cards to the players is nothing but chance. Another problem with online gaming is that the age of the persons playing cannot be verified, unlike in casinos. Hence, online gaming should be treated like a lottery or a sin product and should attract the highest rate of GST, i.e. 28%. 

The GST Council had levied a uniform rate of 28% on lotteries in December 2019. 28% applies to both state-run and state-authorised lotteries. Previously, state-run lotteries attracted 12% GST, and state-authorised lotteries attracted 28% GST. 

The GoM is expected to report next month to the GST Council after examining all issues related to online gaming and proposing their view on the same. The GoM will also consider whether GST should apply only on the amount retained by the platform or levy on the prize money. The GoM was set up on 24th May 2021, and the panel constituted seven ministers as members under the chairmanship of Gujarat. On 11th June 2021, the finance minister of Telangana joined the group as the eighth member.

The final decision will be taken by the GST Council who is the apex decision-making body on matters of indirect tax. The GST Council is chaired by the Union Finance Minister and consists of representatives of state finance ministers.

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For any clarifications/feedback on the topic, please contact the writer at athena.rebello@cleartax.in

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