GST Council should differentiate between games of skill and games of chance: Former CBIC chair

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Former chairperson of Central Board of Indirect Taxes and Customs (CBIC) John Joseph expressed his views on the GST rate for online games recently, saying that the GST Council and CBIC need to differentiate between skill-based and chance-based online games before coming up with a new tax rate.

The next GST Council meeting is expected to be held soon and finalize the tax rate on online gaming after reviewing the Group of Ministers (GoM) report which suggested 28% tax rate on contest entry amount (CEA).

However, the online gaming industry has insisted that there should be different tax rates for games of skill and games of chance. Furthermore, the industry also believes that the tax on CEA will be detrimental and instead it should be charged on gross gaming revenue (GGR).

“It would be important to maintain a distinction between online games which are skill preponderant and games that are in the nature of betting, wagering and gambling. The GST law already provides for taxing actionable claims in betting and gambling,” said Joseph, a member of Strategic Consultancy and Think Tank, DeepStrat, as quoted by Moneycontrol.

“However, it would be an act of folly to extend the application of the same concept to services offered by online gaming intermediaries, which are constitutionally protected,” he added.

A recent analysis of the GoM recommendations by law firm Lakshmikumaran & Sridharan (LKS) Attorneys also concluded that there needs to be differentiation between skill-based and chance-based games to determine GST rates.

The changes in TDS rules also came into effect in April this year, removing the minimum threshold of Rs 10,000. MeitY, on the other hand, released amendments to IT Rules 2021 which, according to Joseph, further clarified the difference between online skill-based and chance-based games.

“The definition and the associated rules brought out by the Ministry of Electronics and Information Technology (MeitY) are part of an important step in encouraging the gaming ecosystem in the country,” he added.

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