No Tax Relief Offered for Online Gaming and Casino Deposits

Anil Panesar - Senior WriterAnil Panesar - 12 September 2023 in News
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Just weeks after the new 28% tax was imposed on Indian gambling companies, India’s Finance Ministry has confirmed no tax relief for deposits made. It doesn’t matter what kind of casino banking you use, you will find no tax relief.

The Finance Ministry of India has confirmed that deposits made to online gaming platforms and casinos will not qualify for any form of tax relief. This was announced through a notification which clearly stated that any refunds made to players will be exempted from receiving tax relief.

The updated guidelines have been integrated by modifying the CGST rules of 2017, with the effective date of the changes yet to be unveiled by the government.

Tax Computation Explained

As per the newly introduced rules, the taxable sales value for online gaming services will be computed based on the overall amount deposited to the platform. The directive emphasises that any sum returned or reimbursed by the service provider to the player cannot be subtracted from the supply's value. This ruling remains valid even when players do not utilise the deposited amount with the platform.

Casinos Under the Same Roof

Casinos are also subjected to similar regulations. Any money or its equivalent returned to the player in forms such as tokens, coins, chips, tickets, or any other means, will remain non-deductible from the supply's value concerning actionable claims within the casino.

Alignment with the GST Council's Recommendations

The modifications are aligned with the suggestions from the 51st GST council meeting. The core intention behind these changes is to bring about transparency and precision to the valuation techniques applied for settling GST responsibilities in the gaming sector.

Despite these clarifications, the industry remains in a quandary about whether mere deposits into a wallet constitute a supply, indicating possible challenges from industry representatives.

Tax Professionals Weigh In

Leading tax professionals highlight that the revised valuation rules will apply a full tax rate of 28% on the entire sum paid to online gambling companies and casinos. Consequently, in situations of refunds or returns, taxpayers will not receive any form of relief.

Other Developments in Online Gaming Taxation

In a separate development, Finance Minister Nirmala Sitharaman revealed that the government has opted to impose taxes on online gaming firms based on the total funds deposited for gaming purposes, instead of taxing every individual bet.

This comes as a slight relief after a previous decision last month where a 28% tax was to be levied on funds collected by online gaming companies from their clientele for every placed bet. This unexpected move had taken the budding $1.5 billion industry by surprise.

Industry's Response to Tax Changes

In the aftermath of this decision, over 100 gaming companies, including influential investors such as Top Tiger Global and Peak XV (formerly Sequoia Capital India), reached out to the government to reconsider their stance.

Tax Implementation Date and Review

The taxation decision was made by the Goods and Services Tax Council, which includes finance ministers from all Indian states, headed by Sitharaman. The implementation of this tax is planned from October 1, with a promise to revisit this decision in the forthcoming six months.

Concerns Over the Tax Rate

However, some industry observers have expressed concerns over the 28% tax rate. Sudipta Bhattacharjee, a partner at Khaitan & Co., remarked that while the tax alteration provides some relief to the digital gaming industry, many emerging start-ups might struggle under the weight of this high GST rate.

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