ONLINE GAMING TO INCUR GST STARTING OCTOBER 1ST

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The rollout of the 28 percent GST on October 1 is marred by confusion, primarily stemming from some states not yet notifying their online gaming legislation. The finance ministry, on a late Friday announcement, set October 1 as the date for the amended provisions in the Central GST and Integrated GST laws to take effect.

E-gaming companies have raised concerns, pointing out that since many states have not yet amended their State GST (SGST) laws, the Union government’s notification in the Central GST (CGST) and Integrated GST (IGST) laws will create a state of perplexity. Starting from October 1, online gaming companies will be subject to a 28 percent GST on the full value of bets, and even offshore platforms will need GST registration to operate in India.

A spokesperson from the All India Gaming Federation (AIGF) noted that the central government has indeed notified the applicability of the new GST regime for online gaming starting October 1. However, it appears that multiple states have not yet enacted amendments to their State GST Acts, leading to a puzzling scenario where online gaming companies in such states will charge CGST but not SGST. Conversely, in states where the amendments have been implemented, both CGST and SGST will be levied. In light of this, the industry hopes that the government will acknowledge the situation and allow a reasonable transition period.

Abhishek Jain, indirect tax head and partner at KPMG, commented, “With these provisions becoming effective tomorrow, the industry must ensure it is adequately prepared for the revised taxation. While most provisions for the revised taxability have been notified, there are still ambiguities on certain matters, including the classification of supplies, time of supply, and transition provisions.”

Sanjeev Sachdeva, a partner at Luthra and Luthra Law Offices India, explained that the amendments will not come into force in states that have yet to enact them, but CGST will apply even in those states. He highlighted the uniqueness of the situation and cited a precedent where the Supreme Court ruled that the GST Council’s recommendations are not binding on the states, which maintain their autonomy in implementing the Council’s suggestions.

S.R. Patnaik, partner and head of taxation at Cyril Amarchand Mangaldas, expressed concerns about the uncertainty surrounding the implementation of these rules in states that have not yet notified them, potentially leading to tax disputes.

Abhishek Malhotra, managing partner of TMT Law Practice, emphasized the need for a wait-and-watch approach, suggesting that some states might resort to the ordinance route to meet the deadline. He noted that if all states do not implement the law or amendments, it could undermine the intended purpose of the GST system, causing further confusion and compliance burdens in an already complex sector.

Sources indicated that several states where the gaming industry operates have either passed the legislation or taken the ordinance route, as seen in Karnataka. Other states are expected to follow suit with ordinances in the near future, attempting to rationalize the Centre’s notification.

Under the changes to the Central GST Act, online gaming, casinos, and horse racing will now be treated as “actionable claims,” similar to lottery, betting, and gambling, and subjected to a 28 percent Goods and Services Tax (GST) on the full face value of bets. Amendments to the Integrated GST (IGST) Act make it mandatory for offshore online gaming platforms to register in India and pay a 28 percent tax in accordance with domestic law. These amendments also empower authorities to block access to overseas online gaming platforms in cases of non-compliance with registration and tax payment requirements.

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