Payments, Winnings in Digital Assets, Casino, Online Gaming to Face GST

The Goods and Services Tax (GST) Council is set to bring payments received and winnings paid in virtual digital assets (VDAs) by casinos and online gaming companies under the ambit of GST. This move is aimed at regulating both domestic and overseas online gaming entities that accept and make payments in VDAs, including cryptocurrencies.

The GST Council had previously approved a 28% levy on online gaming, casinos, and horse racing on the full face value. However, it will meet virtually on August 2 to clarify the definitions of “online gaming” and “online money gaming.” The forthcoming amendment to the Central Goods and Services Tax (CGST) Act seeks to eliminate any ambiguity and provide clear guidelines for taxing such transactions involving virtual digital assets.

According to officials familiar with the matter, the definition of “online money gaming” is likely to include online games where players pay, deposit, or receive money or money’s worth, including virtual digital assets, with the expectation of winning money. Additionally, any experiences or rewards given to players that hold a monetary value equivalent to the gift or experience offered will also be considered as part of the “prize.”

This clarification is particularly relevant for casinos and online casinos that engage in transactions involving virtual digital assets. The inclusion of central bank digital currency (CBDC) in the definition is seen as vital in light of India’s ongoing exploration of its own digital currency.

The GST Council’s decision to meet again on August 2 stems from the challenges in determining the full face value when players use previous winning amounts for subsequent games. The industry had recently expressed concerns regarding the 28% tax levy, arguing that such taxation could result in the effective tax rate reaching as high as 50%-70%, leading to repeated taxation of the same rupee.

In response to the industry’s concerns, the council will consider proposals for taxation on deposits, aiming to address the issue of repeated taxation and alleviate difficulties faced by gaming companies and players alike. However, the final decision on this matter will be determined by the GST Council.

As the government seeks to regulate the online gaming and casino industry, the inclusion of GST on payments and winnings in virtual digital assets aims to ensure transparency, fairness, and revenue generation. By bringing clarity to the tax framework, the government intends to strike a balance between fostering the growth of the gaming sector and maintaining a suitable tax regime.

The forthcoming clarification by the GST Council will have a significant impact on online gaming companies and casinos, with potential implications for the broader digital assets market. Stakeholders will be keenly observing the outcome of the council’s meeting, as it will determine the regulatory landscape for the digital gaming sector in India.