India’s Cabinet has approved goods and services tax (GST) amendments for online gaming and other gaming segments in an 11th-hour effort to push the changes through the legislature before its session ends this week.
The Cabinet signed off on amendments to the Central Goods and Services Tax Act 2017 and the Integrated Goods and Services Tax Act 2017 that will impose a flat 28 percent GST on all online gaming products, land-based casinos and horseracing, the Press Trust of India (PTI) reported on Wednesday (August 9).
The PTI report confirmed that the changes include extending GST liability to foreign online gaming operations that host Indian customers and authorising website blocking against operations that do not comply.
The text of the amendments has not been released, and the PTI and other reports did not refer to their contents.
The Indian parliament concludes its monsoon session on Friday (August 11) with much time this week eaten up by a no-confidence motion, leaving open the possibility that passage could be delayed ahead of the government’s promised enforcement date of October 1.
However, other reports on Wednesday indicate the government is intent on honouring its October 1 enforcement pledge, with India’s Telegraph reporting that an ordinance will likely be issued if amendments have not passed.
State governments are awaiting the central legislature to pass the amendments so that their own legislatures can amend tax laws ahead of the enforcement date.
Amid industry warnings of disastrous impacts on gaming operators across the board, the GST Council determined last month that the 28 percent GST shall be levied on the “full face value” of bets in all gaming segments, and not on gross gaming revenue.
That decision, which the GST Council declared to be a clarification of existing practice despite it not being in practice in the online sector, was reviewed in a hastily convened follow-up meeting last week amid industry dismay and dissent from several state government ministers.
The second meeting then walked back the damaging impact of the 28 percent GST to some extent by applying it to initial deposits rather than the sum of individual bets.
Finance minister Nirmala Sitharaman has also said the GST on gaming will be reviewed six months after the date of enforcement.
The central government clarified this week that the 28 percent GST will not apply to esports and non-wagering video games as these are not “pay to play” products.
“Esports and video games, intended purely for entertainment and not involving betting, gambling or any money transactions, will continue to be taxed as they have been,” the Business Standard daily quoted a government spokesperson as saying on Tuesday.
Possible fallout from the GST Council’s decisions has begun, with the Mobile Premier League fantasy sports platform announcing on Tuesday that it will cut 350 employees in response to the new GST arrangements, citing a 350 to 400 percent increase in its tax burden.
Listed casino owner and fledgling online gaming operator Delta Corp also suspended plans for an initial public offering for its online gaming arm, according to media sources.
Nostaga Technologies start-up Quizy Games also announced it will shutter operations over the tax.