Is GST Applicable on Online Gaming Winnings?

The Central Board of Indirect Taxes and Customs (CBIC) Chairman, Sanjay Agarwal, has announced that India is prepared to implement a 28% Goods and Services Tax (GST) rate on online gaming starting from October 1.

This move comes with the consensus of all Indian states and follows the recent passage of amendments to GST laws in the Lok Sabha. Players are now required to pay GST on the full value of their initial purchase of the in-game currency. Simply put, the individual will pay Rs 28 of the first Rs 100 spent in the game, which is 28%.

Under the GST regime, online games are differentiated between skills and chance. A game of skill requires the expertise and experience of the player, whereas a game of chance is simply betting or gambling, assuming the risk of loss. In India, Poker, Rummy, and Horserace Betting are considered games of skill, while Blackjack, Roulette, Sports Betting, and such are games of chance. However, in the case of tax payable, the same rates will be equally applicable to both types of games.

This 28% GST is not applicable to your winnings, though. You have to pay the GST while depositing money on a gaming or betting platform. You pay a 30% TDS on your winnings.

Players have been told that the entire tax will be collected at the entry level only, and no tax will be applicable on winnings used further in the game. However, the tax charged will not be returned in case the players receive a cash refund or cashback.

A popular fantasy gaming company has found a workaround – they are giving a bonus code that gives users exactly a discount on their tax amount (28%). Creative solutions like these could be the answer for the continued growth of the online real money gaming market in India. Most offshore casino sites already give really good online casino welcome bonuses to new players. But when GST is applicable to their deposits as well (not happening yet), they can also start giving additional bonuses and promo codes to incentivize the customer.

Industry insiders are understandably unhappy about this. Experts argue that skill-based gaming should not be grouped with betting or gambling. Some say this will reduce the expansion of gaming companies by a significant margin. As of now, offshore betting sites and online casinos do not have to pay 28% GST because the online gambling market in India remains unregulated. But there has been talk of collecting tax from offshore betting companies recently, and it may be in the works soon.

While it is not 100% illegal to play on offshore betting sites that are licensed outside of India, it is not considered the safest or the smartest option. Because there’s no legal recourse in case of fraudulent activities. If the market were regulated, things would be quite different.