Indian Govt may consider single tax rate for online gaming

The council, which is a federal organisation, is led by the Union finance minister and includes state finance ministers.

According to two people familiar with government thinking, the government may consider a single tax rate for online gaming because two different rates of 18 percent and 28 percent based on the distinction between so-called games of skill and games of chance are prone to misuse and litigation due to the overlap between the two categories.

The GST Council, the top decision-making body on indirect tax affairs, would make the final judgement on this matter, they stated on condition of anonymity. The council, which is a federal organisation, is led by the Union finance minister and includes state finance ministers.

GST Council to address issues of online gaming sector for taxation purposes

On May 24, the GST Council formed a group of ministers (GoM) to discuss tax concerns in the online gaming sector. Initially, it was a seven-member ministerial body chaired by Gujarat. Later, on June 11, Telangana's finance minister was appointed as the group's eighth member.

The GoM will decide whether GST should be charged just on the amount retained by the platform or also on the prize money.

According to the second individual, it is sometimes impossible to determine if a game is solely based on talent or chance. Rummy, for example, is a game of skill, yet the allocation of cards to players is entirely random. Second, unlike in real casinos, where a player's age can be easily confirmed, there is no efficient means to control admission of children as young as 13, which might be harmful to society. As a result, internet gambling should be considered as a lottery, a sin product, and should be taxed at the maximum rate of 28 percent.

There is no objectively definable test, regulatory guideline, or administrative forum to assess and determine whether a game is a game of skill or a game of chance, according to a Niti Aayog discussion paper, citing a report by the Sports Law and Policy Centre, a Bengaluru-based think tank focused on sports law and policy.

A single tax rate on online gaming is desirable

A single tax rate on internet gambling, like lotteries, is preferable to minimise litigation, according to the two persons. In December 2019, the GST Council imposed a standard 28 percent GST on both state-run and state-authorized lotteries. Previously, state-run lotteries were subject to a 12 percent GST charge, while state-authorized lotteries were subject to a 28 percent levy. The lottery business has been lobbying for an unified GST rate of 12%.

According to All India Gaming Federation (AIGF) CEO Roland Landers, the group has suggested that the government maintain the current GSt rate of 18 percent. He stated that online games are focused on skill and should not be confused with games of chance, citing four Supreme Court precedents.

Leading online gaming operators such as MPL, Paytm First Games, Gameskraft Group, Baazi Games, and Adda 52 are AIGF members.

Various high courts held various online games as games of skill

According to Bipin Sapra, partner, tax and regulatory services, indirect tax at consultancy company EY, "different high courts have unequivocally held certain online games like Online Rummy, Fantasy Sports (e.g. Dream 11), etc., as games of skill and separated them from games of chance." The online gaming platform functions similarly to any other e-commerce platform in that it links numerous gamers who participate in the game. The platform's fee is in place of the service provided and is the only taxable value.

Landers said that an 18 percent GST is in accordance with worldwide best practises, where tax rates have ranged from 6 percent to 21 percent. If prices are raised over this level, both operators and players may turn to black market operations, even inside the Indian online gaming community.

Sutanu Behuria, AIGF president, policy and planning, stated that games of skill need players to devote a significant amount of time and effort in training and developing their talents, similar to any regularly played sport. Games of skill are distinguished in this context when talent clearly surpasses chance in terms of game result.

Given that gaming is a state-run topic, games such as Rummy, Poker, Bridge, Fantasy Sports, and E-sports are deemed games of skill, according to the gaming statutes of various states, he added. Behuria used to be a bureaucrat.

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