The online gambling industry has applauded Finance Minister Nirmala Sitharaman's recent comments that the 28% GST would be levied prospectively rather than retrospectively on casinos, online gaming, and horse racing. "A clarification on that levy was issued, and the tax is 28%, according to that." It has been clearly stated to whom it will apply and on whom the incidence will fall. But, on this particular point of valuation rules, I'd want to state unequivocally that the valuation rules to exclude winners are prospective," the finance minister stated in Lok Sabha on December 19 in response to a discussion on the GST (Second Amendment) Bill.
In effect, the new valuation criteria went into effect on October 1, with the 28% GST paid on entry-level wagers on online gambling platforms rather than what players pay in each game from the winning sum. According to experts, the finance minister's clarification will benefit the industry, but it is uncertain whether it will have any effect on the tax notices and ongoing lawsuit. "The industry, which is facing unique business challenges as a result of GST, will be looking to the courts for the final view on the interpretation on the valuation for the past period," said Shilpy Chaturvedi, Partner, Deloitte India. The industry is looking forward to the GST Council's study six months following the levy's adoption."
According to Ankur Gupta, Practice Leader – Indirect Tax at SW India, the clarification may have an impact on gaming enterprises for earlier tax months using the valuation technique established only in October 2023. "As a result, after taxing the initial amount, winning amounts re-used to play will not be chargeable to GST." However, because this is a proposed change, bets from the winning sum will not be eligible for exclusion before October 2023," he explained.
In recent months, the online gaming business has been attempting to mitigate the impact of the 28% GST on their operations, as well as being concerned about tax notices being sent for payment of past dues.
During the fiscal years 2022-23 and 2023-24 (up to October 2023), 71 show cause notices were issued to online gaming enterprises, totaling Rs 1,12,332 crore in goods and services tax, minister of State for finance Pankaj Chaudhary recently briefed the Rajya Sabha.