GST on Deposits

Explained: Impact of 28% GST on Online Gaming

In August 2023, the government announced the imposition of a 28% Goods and Services Tax (GST) on real money games, including app-based online gaming. The Finance Ministry has stated that this new GST law will come into effect on October 1st, 2023. The tax will be applicable to the value of deposits made in online gaming.

The implementation of this new GST policy has sparked lot of speculations, We are clarifying the legal position and mechanism as notified by the government. The new regime change in GST is similar to TDS change on deposit and withdrawal implemented during last budget. We are happy to clarify any questions in relation to the same. Feel free to reach out to us.

How Will Taxation Work?

Current practice: On these gaming platforms, every user is obligated to pay an entry fee in order to participate in a specific game. Let's take the example of hiscore.games, where a user pays an entry fee to join a game. The platform operator deducts a portion of the entry fee as a platform fee. This platform fee is referred to as the gross gaming revenue (GGR), while the remaining amount is allocated to the prize pool. Previously, a GST of 18% was applied to the GGR, and it was the responsibility of the platform operator to pay the applicable taxes.

According to the latest GST Policy for Online Games w.e.f 1st October, 2023, the tax will now be imposed on the full value of deposits at a rate of 28%. In current as well as new regime, it is the responsibility of the platform operator to pay the applicable taxes after collecting from the user in terms of the law. The amount collected is deposited in the government treasury.

Non-money, Real-Money, and Casual Gaming

Non-money gaming will not be impacted by the new GST policy. Only real money gaming will be considered as a supply of actionable claims, therefore, a 28% GST will be applicable to the value of a deposit made by a user on an online money gaming platform.

There is no GST applied to casual gaming services offered by these platforms without consideration. The main objective behind categorizing the GST implication is to consider the purpose of each game, whether it is a sport, entertainment, or recreation and played for consideration. Casual gaming without any consideration is not impacted by the change.

No GST on Winnings

If players re-enter a game with their winnings, no GST will be applicable in this scenario as GST is already paid on the amount deposited by the players initially. If a player loses in a game, there is no scope for GST anyway.

When a player wins and re-enters a game, they will not be taxed again. It's important to note that when withdrawing the winnings amount, TDS is applicable. Every real cash rummy player should be familiar with https://hiscore.games/tds/ as well.

Example