GST on Betting, Gambling, Casinos, Lottery & Online Gaming – What You Need to Know

In India, the Goods and Services Tax (GST) has significantly changed the taxation of many activities such as betting, gambling, casinos, horse racing, lottery, and online money games. It is critical to understand how GST (Goods and Services Tax) applies to these. This has consequences for both company and consumers. Taxes can be difficult to understand, particularly when it comes to betting, gambling, casinos, lotteries, and internet gaming. From placing bets to enjoying a round of online poker, each action may carry its own tax implications. In this article we will understand the basics of GST on betting, gambling, casinos, lotteries, and online gaming, simplifying the complexities to help you understand better.

What is the meaning of Betting, Gambling and Lottery under GST Law?

‘Betting, Gambling, and Lottery’ are actionable claims and fall inside the scope of goods, according to Section 2 (52) of the CGST Act, 2017. The Supreme Court recently ruled that betting, gambling, and lotteries are taxable under the CGST Act, 2017. “A claim to any debt other than a debt secured by mortgage of immovable property or hypothecation or pledge of movable property” is defined as “actionable claims.”  The activities linked to betting, gambling, and lottery are solely subject to GST, and no actionable clime is covered by the GST as a result of Schedule III change. Section 65B (15) defines “betting or gambling” as putting on stake something of value, particularly money, with consciousness of risk and hope of gain on the outcome of a game or a contest, whose result may be determined by chance or accident, or on the likelihood of anything occurring or not occurring.

GST on Betting and Gambling

According to the goods and services tax (GST) law, gambling and betting, whether online or offline, constitute services. Currently, an 18% GST is levied on online skill games, while a 28% GST is applied on online chance games. Betting and gambling are games of chance, as opposed to skill-based activities such as e-sports and some card-based games. A commission charge in a skill game is subject to 18% GST under HSN 998439. GST is collected on the gross gaming value or stake value in gambling/betting. As a result, regardless of whether the participants win or lose, GST collection is guaranteed.

GST on Lotteries

GST (Goods and Services Tax) on lotteries in India underwent several changes in its taxation structure.

Previously, there were two types of lotteries:

• State Lotteries: These were subject to a uniform 12% GST rate.
• State-Authorized Lotteries Sold Outside the State: These were taxed at a 28% GST rate.

To address difficulties raised by different tax rates on the same product, the GST Council voted to modify the tax rate on lotteries in December 2019. A single GST rate of 28% was applied on both state and state-authorized lotteries beginning March 1, 2020.The 28% tax rate applies whether the lotteries are sold inside the same state or beyond state lines. 

GST on Online Gaming

GST on online gaming in India is governed by specific regulations. Here’s an overview:

• Taxation on Online Gaming Services: Online gaming services are subject to GST in India. The rate of GST applicable to online gaming is 18%, as per the current regulations. This rate may vary based on the nature of the service provided.
• Taxability of In-Game Purchases: In-game purchases of virtual items, skins, or other digital goods within online games are also subject to GST. The tax is levied on the consideration paid for such purchases.
• Registration and Compliance: Businesses offering online gaming services are required to register for GST if their annual turnover exceeds the threshold limit set by the authorities. Compliance with GST regulations, including filing returns and payment of taxes, is mandatory for such entities.
• Place of Supply Rules: Determining the place of supply is crucial in online gaming transactions involving players or users located in different states. GST implications can vary based on the location of the service provider and the recipient.
• Updates and Amendments: The regulations concerning GST on online gaming may evolve over time, with amendments or clarifications introduced by the government or the GST Council.

Recent GST Updates and Changes

The GST Council has decided to levy GST on “Betting, Gambling, Casinos, Horse Racing, Lottery, and Online Money Gaming” in accordance with the GST Law. Based on the Council’s suggestion, the Government of India amended the CGST Act by Act No. 30 of 2023 on August 18, 2023, to impose GST at 28% with effect from October 1, 2023.  CBIC issued Notification No.11/2023-Central Tax (Rate) on September 29, 2023. The following are the specifics of the changes made:-

• Section 2 (80A) defines “online gaming”; 
•  Section 3 (80B) defines “offline gaming.” Section 2 (80B) defines ‘online Money Gaming,’ 
•  A provision in Section 2 (105) has been included to clarify who is the supplier in the case of the supply of a defined actionable claim.
• Clause (xia) has been added to Section 24 to require required registration of anyone providing online money gambling from a location outside India to a person in India, and 
• The phrases “Lottery, Betting, and Gambling” have been replaced in Schedule III with “Specified actionable claims.”

Conclusion

The application of GST on betting, gambling, casinos, horse racing, lottery, and online money gaming is a significant change in India’s tax landscape. The current GST rate on online gaming stands at 18%, subject to variations based on specific services provided, ensuring uniform taxation across digital gaming platforms. These reforms aim to regulate and streamline the taxation of these activities so that they contribute to the nation’s revenue. As the gaming and gambling industries develop, it is vital for firms and consumers to stay up to date on these developments and to comply with updated tax regulations.