Mumbai: In its last meeting, the GST Council took the decision to levy a 28 per cent tax on the total bet placed at entry level for each gaming session from October 1.
As per media reports, this recently proposed 28 per cent goods and services tax (GST) on online games involving real money will not affect the taxation on e-sports, such as FIFA and League of Legends, or leading titles on PlayStation, Xbox, and Nintendo platforms.
The higher tax rate will be applicable only on pay-to-win games, such as fantasy sports, rummy, and poker, which have the scope of monetary gains.
E-sports and video games which are intended solely for entertainment and do not include betting, gambling, or any money transactions, will continue to be taxed as earlier. As of now, such e-sports and games, which are meant for entertainment, call for 18 per cent GST.
As per the rules, there will be a distinction between games involving monetary gains and games or sports that are meant solely for entertainment.
Media reports suggest that some top players of the video gaming industry had approached the finance ministry and sought clear differentiation to eliminate misconceptions arising from the terminology. Some of these entities brought up the unconnected association between e-sports and gambling, betting, and similar activities.
E-sports has been recognised by the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules and the same should be clarified for taxation purposes, as mentioned in a media report.
In its previous meeting, the GST Council approved upon inserting the definition of online gaming: “An offering of a game on the internet or an electronic network and includes online money gaming.”
“Online money gaming” is likely to mean “games where players pay or deposit money or money’s worth, including virtual digital assets, in the expectation of winning money”.
Additionally, a new provision is also expected to be included for online money gaming offered by a person located outside the taxable territory. The person will be included under the ambit of Integrated GST.
The framework could also include a “specified actionable claim” to encompass betting, casinos, gambling, horse racing, lottery, and online money gaming.
An amendment in this regard to the Central GST Act is expected in the ongoing monsoon session of Parliament. Despite a few days left in the session, the proposed draft Bill seeking the amendment is yet to be listed. The Centre can circulate an Ordinance and also move a supplementary business list in the case of special legislation.
After the Council meeting, Union finance minister Nirmala Sitharaman specified that the provision to enforce higher taxation on online gaming would likely be considered in the ongoing parliamentary session. She also urged states to amend their laws as soon as possible for timely implementation.
Some of the major players of electronic games purely for entertainment purposes include Sony, Microsoft, and Activision Blizzard. Some of the large players in the online money games space include Dream11, WinZO Games, and Nazara Technology.
