Goods and Services Tax Council under the leadership of Finance Minister Nirmala Sitharaman is set to meet today, August 2.. The council is expected to clarify the definition as well as the 28% tax and how it will be levied on online gaming. 

 The main focus of the council's discussion will be to define and clarify what constitutes online gaming for tax purposes. This includes determining whether games of skill or chance should fall under the same tax category.

The council, presided over by FM Sitaraman, will conduct the meeting via video conferencing, ensuring efficient communication among its members.

During the previous meeting held on July 11, the GST Council decided to impose a 28 per cent GST on online gaming, horse racing, and casinos based on the full value. In the ongoing Monsoon Session of the Parliament, the government is also planning to introduce amendments to the GST Act to make online gaming and horse racing taxable actionable claims.

However, the online gaming industry has expressed its concerns over the 28 per cent taxation rate. Bimal Jain, Chairman of the Indirect Tax Committee, PHDCCI, emphasized the need for a clear distinction between skill-based online games and those involving betting or gambling. He suggested that a more reasonable 18 per cent levy would be preferable to protect and promote the industry, including startups in this sector.

Roma Priya, founder of Burgeon Law, a legal firm with a focus on the startup ecosystem, pointed out that the 28 per cent tax has blurred the line between games of skill and chance, treating online skill gaming as equivalent to gambling. She also highlighted the negative impact on customers, as they would receive less playable value due to taxing the entire value of bets. Roma Priya further asserted that this taxation approach would hinder the growth of the online gaming industry.

Suman Bannerjee, CIO of the US-based hedge fund Hedonova, echoed similar sentiments, expressing concerns about the negative implications of the 28 per cent tax on the industry.

On the other hand, Sanjay Chhabria, Director of Indirect Tax at Nexdigm, acknowledged the positive step taken by the council to consider industry feedback on the 28 per cent tax. While he believes that a complete rollback of the levy is unlikely, he remains hopeful that the council might offer some relief to the Indian online gaming startup ecosystem. Chhabria suggested that industry players use this opportunity to advocate for a reduced GST rate, a clear distinction between skill-based and chance-based games, and a shift in the valuation mechanism to prefer gross gaming revenue over the value of bets.

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