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Levy Of 28% GST Online Skill Gaming - Against Fair Taxation
The government is planning to levy the highest goods and services tax (GST) slab on the online skill gaming industry which could hinder the growth of this booming industry and topple the progress made so far.
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The government is planning to levy the highest goods and services tax (GST) slab on the online skill gaming industry which could hinder the growth of this booming industry and topple the progress made so far. Online games of skill refer to platforms like fantasy sports, and online rummy where the skill of the participant plays a critical role in determining the participant's success. Courts in India have applied the “preponderance test” to determine whether the game in question is a game of skill or a game of chance. Games that have a preponderance of skill in them have been held to be games of skill by the court and do not amount to betting/gambling/wagering.
With this video, we will help you understand why 28 per cent GST is not justified for this growing sector and how it is against the principles of fair taxation and also incorrectly qualifies the online skill games.
The Central Goods and Service Tax (GST) Act of 2017 states that "actionable claims other than lottery, betting and gambling" shall not be treated as a supply of goods and services and therefore shall not be liable to be taxed under the GST Act.
Online games of skill are legitimate businesses and do not amount to betting, gambling, and wagering as consistently held by various courts of law in India.
Recently, in a major development for the Indian fantasy sports industry, a division bench of the Supreme Court, comprising Justice BR Gavai and Justice CT Ravikumar, dismissed a special leave petition filed by Avinash Mehrotra. Madras High Court (2020) also struck down the provisions of Tamil Nadu Gaming and Police Laws (Amendment) Act, 2021 which sought to prohibit/ban games of skill by including it under the scope of betting and gambling and clarified that the state does not have the power to expand the scope of betting and gambling to include “games of skill”. Since they are not lottery, betting, and gambling, the prize pool which is an actionable claim for online games of skill shall not be liable to tax as per the provisions of CGST Act. Therefore, levying tax on the prize pool which is in fact an actionable claim will be in violation of the CGST Act.
28 per cent GST on contest entry amount can annihilate the entire online skill gaming industry
Currently, an 18 per cent GST is levied on the platform fees which is also named as gross gaming revenue (GGR) If the government levies 28 per cent GST on the entire contest entry amount, which is the total money deposited by a user while entering a contest, it will lead to an almost 900 per cent increase in taxes, which could kill this sunrise sector.
Only the platform fee charged by skill gaming operators constitutes the value of supply
In real money gaming, money deposited by players to create a prize pool that is later distributed among winners can be considered as an actionable claim which is treated as neither supply of goods nor services under the GST law except for in the case of lottery, betting, and gambling. In the case of online games of skill like fantasy sports, the operators hold the prize pool only temporarily and have no right over such a prize pool and then distribute it amongst the winners after the end of the contest. Therefore, only the platform fee charged by skill gaming operators from the contest entry fee deposited by a user actually constitutes the value of supply. 28 per cent GST on the entire contest entry fee will not only be fatal for the online skill gaming industry but also discourage users to use these platforms which may prove to be advantageous to the grey markets and offshore betting platforms where operators can easily evade taxes.
To know more, watch here:- https://youtu.be/9LQdr9Q0F0c