India’s GST Council to consider tax relief for online gaming sector

Jenny Ortiz June 20, 2024

In a move that could bring relief to India’s online gaming industry, the Union Finance Ministry has proposed an amendment to the Central Goods and Services Tax (CGST) Act, 2017. The proposed amendment involves the introduction of a new Section 11A, which would allow the central government to “not recover the GST not levied or short-levied as a result of general practice.” This proposal will be discussed at the upcoming federal GST Council meeting scheduled for June 22nd in New Delhi.

If accepted, this amendment could lead to the non-recovery of the 28 percent GST on e-gaming, casinos, and horse racing. Industry stakeholders have expressed concerns about the previous tax decision, which they say was implemented without clear guidelines and has led to significant financial challenges.

Potential impact on the industry

The proposed amendment aims to regularize past practices where GST was not fully applied, thereby preventing retrospective tax demands that could financially harm online gaming companies. This change could ensure that companies are not held liable for GST that was not levied due to common industry practices.

The Law Committee’s recommendations highlight the importance of legitimising these past practices to avoid financial instability within the sector. However, it is important to note that the proposed changes do not provide for refunds of any excess GST paid due to these practices. This means that while future compliance may become clearer and disputes may be reduced, companies will still bear the burden of any overpaid taxes.

Legal and financial implications

India‘s GST Council will also address the significant demand notices issued to approximately 80 online gaming companies in India. These demand notices have been a major point of contention, with the industry arguing that the retrospective application of such taxes could lead to severe financial consequences.

The 52nd GST Council meeting in October 2023 had already set a 28 percent GST on the initial bet amount, with a review pending. Despite industry pushback, sources indicate that the government is likely to maintain its current stance on taxation, citing substantial increases in tax revenue and regulatory benefits since the new regime’s implementation. Since October 2023, GST collections from online gaming have surged by 400 percent, reaching an average of Rs. 1,200 crore (€133,889) per month.

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