The taxation of online gaming has been a controversial topic in India. Some people argue that online gaming should be taxed at a lower rate, as it is a relatively new industry. Others argue that the current GST rate is fair, as it is similar to the GST rate for other forms of entertainment. The GST on online gaming is still evolving. In our previous article "PRAHAR ON ONLINE GAMING APPS" we had discussed the new laws that are applicable to the online gaming apps under both Income Tax Act and GST regime and the decisions of council meeting to impose heavy taxation on online gaming.
To give effect to the decisions of GST Council meeting certain amendments have been brought in and through this article we shall discuss those amendments in detail.
Amendments brought in by Central Goods and Services Tax (Amendment) Act, 2023-
Amendment of section 2.
2. In section 2 of the Central Goods and Services Tax Act, 2017 (12 of 2017.) (hereinafter referred to as the principal Act),—
(a) after clause (80), the following clauses shall be inserted, namely:—
`(80A) "online gaming" means offering of a game on the internet or an electronic network and includes online money gaming;
(80B) "online money gaming" means online gaming in which players pay or deposit money or money`s worth, including virtual digital assets, in the expectation of winning money or money`s worth, including virtual digital assets, in any event including game, scheme, competition or any other activity or process, whether or not its outcome or performance is based on skill, chance or both and whether the same is permissible or otherwise under any other law for the time being in force;’;
Through this amendment online gaming and online money gaming has been defined. Both the definitions are exhaustive in nature and no scope for further inclusion of any other activity has been left out.
Online gaming is a wider term and encompasses online money gaming. Where, in online gaming there is an expectation of winning money or money’s worth then such online gaming shall be considered to be an online money gaming. The term money’s worth has not been exhaustively defined but the statute clearly indicates that virtual digital assets shall form part of money’s worth. Money’s worth can also be in kind and is not merely restricted to hard cash or bank transfers.
(b) after clause (102), the following clause shall be inserted, namely:—
`(102A) "specified actionable claim" means the actionable claim involved in or by way of—
(iv) horse racing;
(v) lottery; or
(vi) online money gaming;’;
Previously under clause (1) of section 2 of the Central Goods and Services Tax Act, 2017 the term actionable claim was defined as under-
"(1) "actionable claim" shall have the same meaning as assigned to it in section 3 of the Transfer of Property Act, 1882;"
Previously vide Para 6 of schedule III to the CGST Act actionable claims other than lottery, betting and gambling were excluded from the scope of supply. Now since they have specifically defined the Ationable Claims that they intend to tax schedule III has also been amended. The amended Para 6 is as under-
6. Actionable claims, other than specified actionable claims.
(Kindly refer to amendments in Schedule III which is reproduced later in this article)
(c) in clause (105), the following proviso shall be inserted at the end, namely:—
"Provided that a person who organises or arranges, directly or indirectly, supply of specified actionable claims, including a person who owns, operates or manages digital or electronic platform for such supply, shall be deemed to be a supplier of such actionable claims, whether such actionable claims are supplied by him or through him and whether consideration in money or money`s worth, including virtual digital assets, for supply of such actionable claims is paid or conveyed to him or through him or placed at his disposal in any manner, and all the provisions of this Act shall apply to such supplier of specified actionable claims, as if he is the supplier liable to pay the tax in relation to the supply of such actionable claims;";
This provision has been added to the definition of supplier under the above clause and acts as a deeming provision to determine who shall be considered as a supplier of online money gaming activities.
(d) after clause (117), the following clause shall be inserted, namely:—
‘(117A) "virtual digital asset" shall have the same meaning as assigned to it in clause (47A) of section 2 of the Income-tax Act, 1961 (43 of 1961.);’.
Amendment of section 24.
3. In section 24 of the principal Act,—
(a) in clause (xi), the word "and" ocurring at the end, shall be omitted;
(b) after clause (xi), the following clause shall be inserted, namely:—
"(xia) every person supplying online money gaming from a place outside India to a person in India; and".
The above amendment provides for compulsory registration of a person who is deemed to be supplying online money gaming services from a place outside India to a person in India.
Amendment of Schedule III.
4. In the principal Act, in Schedule III, in paragraph 6, for the words "lottery, betting and gambling" the words "specified actionable claims" shall be substituted.
Amendments brought in by Integrated Goods and Services Tax (Amendment) Act, 2023-
Insertion of new section 14A.
After section 14 of the principal Act, the following section shall be inserted, namely:—
Special provision for specified actionable claims supplied by a person located outside taxable territory.
"14A. (1) A supplier of online money gaming as defined in clause (80B) of section 2 of the Central Goods and Services Tax Act, 2017 (12 of 2017.), not located in the taxable territory, shall in respect of the supply of online money gaming by him to a person in the taxable territory, be liable to pay integrated tax on such supply.
(2) For the purposes of complying with provisions of sub-section (1), the supplier of online money gaming shall obtain a single registration under the Simplified Registration Scheme referred to in sub-section (2) of section 14 of this Act:
Provided that any person located in the taxable territory representing such supplier for any purpose in the taxable territory shall get registered and pay the integrated tax on behalf of the supplier:
Provided further that if such supplier does not have a physical presence or does not have a representative for any purpose in the taxable territory, he shall appoint a person in the taxable territory for the purpose of paying integrated tax and such person shall be liable for payment of such tax.
(3) In case of failure to comply with provisions of sub-section (1) or sub-section (2) by the supplier of the online money gaming or a person appointed by such supplier or both, notwithstanding anything contained in section 69A of the Information Technology Act, 2000 (21 of 2000.), any information generated, transmitted, received or hosted in any computer resource used for supply of online money gaming by such supplier shall be liable to be blocked for access by the public in such manner as specified in the said Act.".
CA Pranay Jain is a young and aspiring Chartered Accountant. He qualified Chartered Accountancy Course in 2021 and has a well-established practice in various fields of taxation and auditing, with his core area of practice being in the field of litigation i.e., handling assessment and appeal-related matters and representing assesses before various tax departments.
He is also socially active on LinkedIn at linkedin.com/in/capranayjain
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