Two state government officials have indicated that the GST Council is expected to convene an unplanned meeting on August 2. The purpose of this meeting will be to deliberate on methods to offer clarity regarding the necessary legal amendments and tax treatment. These discussions come in the wake of the recent decision to impose a 28 percent tax on the face value of real-money games.

The upcoming meeting is expected to take place via video-conferencing, and it occurs within a month of the previous GST Council meeting on July 11. During that earlier meeting, there was significant controversy as the council decided to impose a uniform 28 percent tax on the total amount users pay to play skill-based online games, without making any distinction between games of skill and games of chance.

At present, all online gaming platforms are subject to an 18 percent GST on the platform fees, which are also referred to as the Gross Gaming Revenue (GGR). This tax is not applied to the full value of the transactions, known as the Contest Entry Amount (CEA). However, a recent decision to impose a 28 percent tax on the CEA has caused concern.

Also Read: GST Council: 28% tax on online gaming, casinos and horse-racing

The Internet and Mobile Association of India (IAMAI) has expressed worries about this decision, stating that it will result in an approximate 1,000 percent increase in GST on the industry. They believe that such a steep tax hike will have severe repercussions, causing irreversible damage to the $2.5 billion investments in the Indian online gaming startup ecosystem and potentially leading to a complete halt on any prospective Foreign Direct Investment (FDI).

Despite online gaming companies making a representation to the finance ministry requesting a review of the decision, it is unlikely that there will be a roll-back of the decision. According to one of the officials, there are no plans to reconsider the decision during the August 2 meeting.

According to the source, the upcoming meeting’s agenda will be brief and primarily focused on discussing the taxation treatment of online gaming concerning Schedule 3 of the Central GST Act. This schedule outlines how lottery, betting, and gambling are defined and taxed under the Goods and Services Tax (GST) framework.

Also Read: Online gaming companies fear repetitive taxation, seek clarity

During an interview with Moneycontrol on July 13, Revenue Secretary Sanjay Malhotra stated that tax authorities are bound by the principle of equity. Therefore, if online gaming is categorized and treated in a similar manner as betting or gambling, and if betting, gambling, and lottery are subject to a 28 percent tax rate, then online gaming must also be treated accordingly.

Malhotra had stated that under the GST laws, playing for stakes based on an outcome, regardless of the nature of the game, has consistently been taxed based on the face value. Given the recent developments, he emphasized the need to introduce a clarificatory amendment to explicitly address the taxation of online gaming and bring greater clarity to the matter.

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