GST on Online Games

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GST on Online Games

 

Introduction

Before amendment brought in by Central Goods and Services Tax Amendment Act 2023, GST on actionable claim was leviable only on lottery, betting and gambling, which does not involve any skills.

In the landmark Judgment passed by Honourable Karnataka High Court in case of Gameskraft Technology Private Limited, it was held that actionable claim in which skills are involved are outside the purview of GST. Since the above judgement was against the revenue. Gaming sector company which earns huge revenue was taking shelter by referring to above judgement.

Amendment brought CGST(Amendment) Act 2023

  1. Addition in definition of Supplier with reference to online game under section 2(105) of CGST Act 2017 by inserting proviso:
  • A person who organises or arranges, directly or indirectly, supply of specified actionable claim,
  • Including a person who owns, operates or manages digital or electronic platform for such supply
    Shall be deemed to be supplier of actionable claims
  1. Insertion of new Definition “specified actionable claim” under section 2(102A) of CGST Act-2017: means the actionable claim involved in or by way of—

a. betting;

b. casinos;

c. gambling

d. horse racing;

e. lottery;

f. online money gaming;

  1. Substituting Para 6 of Schedule III (Neither supply of goods nor services)
    Old:  Actionable claim other than lottery, betting and gambling
    New: Actionable claim other than specified actionable claim.

Analysis-

  1. Earlier actionable claim which involved in only lottery, betting and gambling were treated as supply and were taxable.
  2. With insertion of above definition through amendments- online game, horse race and casino are also brought under the ambit of GST.
  3. As on day apart from above 6 actionable claims are outside the ambit of GST.

From above discussion it is clear that there is levy of GST on online game. Next question which is ought to arise in the mind of readers.” How much GST need be paid, at what rate it has to paid and when liability of pay tax arises. To answer the above question, we need to first decide answer on what is taxable value.

Valuation

Through CGST(Amendment) Act 2023, a Rule 31B under section 15(5) of CGST Act 2023 has been inserted which specifies taxable value of online game-

Value= Total Amount paid or payable or deposited by supplier by way of money or money’s worth including VDA by or on behalf of supplier.

However, amount returned or refunded by supplier for any reason including player not using deposited amount shall not be deducted from value of supply of online money gaming.

Time of Supply

Actionable claim which is included in definition of goods, time of supply was on invoice basis or last day on which invoice is ought to be issued within meaning of section 31 of CGST Act-2017, whichever is earlier. Since through levy on advances was exempt through notification 66/2017. However, through notification 50/2023 relaxation given from paying on GST on receipt basis in case of specified actionable claim has been withdrawn. In simple words even a single penny of advance received in reference to online game would attract GST as and when deposit is received.

GST Rate: 28%

Summarize

Particulars Remarks
Taxable Value Total amount received by player
GST Rate 28%
Time of Supply Invoice or Receipt, whichever is earlier

From,

CA. Shubham Sawal

Mobile No :-8888998239

Email Id:-cashubhamsawal@gmail.com

 

 

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