The Lok Sabha and the Rajya Sabha approved the Central Goods and Services Tax (Amendment) Bill, 2023, and the Integrated Goods and Services Tax (Amendment) Amendment Bill, 2023, which will be brought into effect from October. In the case of online gaming platforms, 28% GST applies only where wagering is involved and not on any services provided by those hosting casual games.

Parliament approval for the legislative changes on the last day of the monsoon session indicates the tax law changes are on course to be implemented as had been decided by the GST Council, from October. States also have to clear changes to state GST laws in this regard.

The amendments do not affect tax on casual online gaming in which no real money or betting or wager is involved, explained a government official, who spoke on condition of anonymity.

A simplified, but mandatory GST registration for overseas platforms offering online money gaming services to Indian consumers and a special provision bringing tax liability on such platforms are part of the amendments. Non-compliant offshore gaming platforms or websites will be blocked.

Experts described the definitions included in the amendments such as defining 'online gaming', 'online money gaming', 'specified actionable claim' and 'virtual digital asset' as "unambiguous."

"With these amendments, online gaming companies shall not expect any litigation in respect of the charge of GST prospectively. However, litigation for the old period would continue. These regulations clarified that international online gaming corporations would be treated at par with Indian counterparts and need registration in India for payment of GST," explained Rajat Mohan, senior partner at accounting firm AMRG & Associates.

The GST Council's decision to ensure 28% GST is levied on what is called, in legal parlance, 'actionable claims', or a chance to win in casinos, horse racing and online gaming, irrespective of whether these are games of skill or chance was taken after elaborate deliberations for about three years and there is no effect of the amendments on start-up ecosystem in India, as it brings a parity between International entities and domestic ones, the first official quoted above explained. The amendments were cleared on 2 August by the GST.

Any payments made for these activities in crypto assets are also taxable. Activities in which players pay or deposit money or money's worth including virtual digital assets (VDAs) in the expectation of winning money or money's worth including VDAs, whether or not its outcome is based on skill, chance or both and whether it is permissible under any law or not, are covered under the definition of online money gaming. The definition of online money gaming takes into account the fact that online gaming involving stakes is banned in Tamil Nadu.

The Council did not yield to demands from online gaming industry to levy GST only on their margins, called gross gaming revenues (GGR), but opted to levy it on the full value of the amounts deposited. Some of the online gaming industry players have been saying that 28% GST on the face value of deposits was not in the interest of the industry. 

The Council "duly considered the negative impact of online money gaming on society, and the youth in particular, in the form of internet gaming disorder due to addiction to online gaming," said the official quoted above.