Following a decision by the GST Council to impose a 28% GST on real-money gaming, the Centre is now preparing to enact legal provisions requiring the registration of offshore gaming platforms.
Revenue Secretary Sanjay Malhotra, in his address to the media (1) following the 51st GST Council meeting on Wednesday, August 2, revealed these plans. "A specific provision in the law will be introduced, mandating the registration of offshore online gaming. The process will be simple," he explained.
Severe Consequences for Non-Compliance
Non-compliant companies will face bans under the IT Act's provisions, Malhotra added. The Centre also has plans to establish a monitoring cell under the Directorate General of GST Intelligence (DGGI) to oversee companies operating without tax payments.
The All India Gaming Federation (AIGF), however, remained unmoved, highlighting the government's previous unsuccessful attempts to block offshore gaming platforms.
Upcoming Changes and Industry Reactions
Finance Minister Nirmala Sitharaman previously announced the 28% GST on real-money gaming would be implemented from October 1 and reviewed six months after its implementation.
Industry insiders noted that even companies looking to shift their base overseas would still be subject to the new GST levy due to the new registration requirements for offshore companies.
Following the GST Council meeting, Sitharaman confirmed that amendments would be made to the GST Act to allow for the 28% GST levy. This legislation will be addressed during the ongoing Monsoon Session of Parliament.
Varied State Responses to New GST on Real-Money Gaming
Sitharaman added that several states, including Maharashtra, Gujarat, Uttar Pradesh, and Himachal Pradesh, have urged for an early implementation of the 28% tax, believing that enough time has been spent debating the issue. Meanwhile, states like Delhi, Sikkim, and Goa raised concerns and requested a reconsideration of the levy on gross gaming revenue (GGR).
Tamil Nadu's finance minister questioned whether the new tax regime would override the state's existing online gaming ban.
The GST Council's recent decision to impose a 28% GST on online real-money gaming has stirred up the Indian online gaming scene and drawn significant criticism from industry bodies and startups. Despite this, the Council has decided to hold its ground, leaving the industry to anticipate the decision's impact on the Indian gaming industry, which includes unicorn companies like Dream11 and MPL.