The Indian government has recognised the need to establish cohesive valuation methods for online gaming, casinos and race courses when it comes to goods and services tax (GST). This is hardly surprising given the popularity of gaming, gambling, and betting in the country.
Although only skill based games like rummy and the lottery are legally permitted in most Indian states, offshore casinos supply new casino games on an ongoing basis. Such is the demand that some sites provide a service keeping track of all new sites launched in the market, that you can see on the list on that page. It’s against this background of popularity that the government has tasked a panel of ministers to investigate the valuation and administration of GMT.
What will the panel examine?
The panel was convened by Gujarat Deputy Chief Minister Nitin Patel to look into aspects of GST around online gaming, casinos, and race courses. Members of the panel include, Maharashtra Deputy Chief Minister Ajit Pawar, West Bengal Finance Minister Amit Mitra, Arunachal Pradesh Deputy Chief Minister Chowna Mein, Goa Transport Minister Mauvin Godinho, Karnataka Home Minister Basavaraj Bommai and Tamil Nadu Finance Minister P Thiagarajan.
They will look into whether any changes are required regarding the legal provision of valuating services like gaming and casinos for GMT. They will also consider whether the administration of the process is suitable.
Why is the investigation required?
Online gaming is a relatively new and fast rising industry in India and there are many unresolved issues around it. There are also still questions about taxation in the world of horse racing. The government wants to gain a better understanding of the valuation of services provided by casinos, race courses, and gaming companies.
This follows a contentious ruling by Maharashtra Authority of Advance Ruling (AAR) that online games are classified as part of online information and data-based access or retrieval (OIDAR) services. This makes them taxable under GST even if the cloud they are on is not located in India.
Following this ruling, certain aspects require clarification such as classification of games as skill based or chance and the value of tax that needs to be paid. Currently, the services being investigated attract 18% GMT. This may change depending on whether the committee decides the valuation needs to change. For example, should the value to be paid be based on the gross value including prize money or solely on platform fees?
It remains to be seen what changes, if any, will be recommended by the committee. Given the possibility of raising more taxes due the success of these industries it’s entirely possible that the committee will recommend ways to value taxation at a higher level. The committee is due to report back in six months. It’s only at this point that we will know if the taxation landscape regarding casinos, online gaming and race courses in India will alter dramatically.