India has officially announced a 28% Goods and Services Tax (GST) on online gaming. Set to commence from October 1, this new tax regulation is rolling out even while some state governments have not yet passed corresponding legislation. A top finance ministry official confirms that the introduction of the tax will proceed as planned.

Key Features of the New Tax Regime

Implementation Date and Rules

A detailed notification was released in the evening, specifying both the implementation date and the associated rules. This notification also contained alterations to various return forms under the GST framework.

Obligations for Offshore Companies

One crucial aspect to note is that gaming companies based outside India but offering services through intermediaries must register and deduct tax at the source. This is according to the notification issued by the government. Furthermore, these companies have an obligation to maintain a user database.

Legislative Approval in States

According to a government official, all states where gaming companies are situated have already enacted the necessary laws. Those that haven’t are expected to pass relevant legislation or issue ordinances in the coming days.

Industry Response

Lobbying Efforts

The online gaming industry has been in discussions with the government, urging a delay in the new tax regime’s implementation. The industry needs time to align its internal IT systems to comply with the new rules.

Back Taxes and Industry Concerns

Alarmingly, GST authorities have already issued tax notices to various gaming companies, claiming nearly Rs 55,000 crore in back taxes. The industry argues that these changes appear to be retrospective. However, the government contends that the GST Council’s decision merely reiterates the existing situation without invoking retrospectivity.

Role of the GST Council

Tax Decision and Subsequent Meetings

The GST Council, serving as the top decision-making body for indirect tax in India, opted for a 28% tax rate on the face value of bets in casinos, online gaming, and horse racing. The Council further solidified these details in a meeting on August 2, cementing the October 1 implementation date.

Future Reviews

It’s important to note that an amendment to the law was enacted solely for the purpose of providing greater clarity on the issue. The GST Council plans to reassess this levy after a period of six months, offering some potential for future changes.

Conclusion

The new 28% GST on online gaming in India is a significant shift in the taxation landscape, affecting both domestic and offshore companies. While the industry has voiced concerns and requested more time for compliance, the government remains firm in its decision to implement the tax on October 1. As this new tax regime unfolds, it will be crucial to observe its impact on the online gaming industry and whether any amendments will follow in the months ahead.

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