Valuation Rules for GST on Online Gaming Apply Prospectively: FM

The Union Finance Minister, Nirmala Sitharaman, has clarified that the valuation rules pertaining to the levy of 28% GST on entry-level bets in online gaming would apply prospectively, i.e., with effect from October 1, 2023.

This clarification was provided in the Lok Sabha on December 19, 2023, while Sitharaman was responding to queries from members during the discussion on the CGST (Second Amendment) Bill, 2023, which was passed by voice vote on the said day. The Minister stated that “the valuation rules to exclude winnings is prospective. So, I hope there is no confusion on that”.

In August 2023, the GST laws were amended and a tax of 28% was levied on the full face value of bets in online gaming, casinos and horse race clubs. In the subsequent month, the methodology to compute the value of online gaming supply was notified by the Central Board of Indirect Taxes and Customs (CBIC). Through this notification, Rules 31B and 31C were introduced in the CGST Rules, 2017. Rule 31B states that “the value of supply of online gaming, including supply of actionable claims involved in online money gaming, shall be the total amount paid or payable to or deposited with the supplier by way of money or money’s worth, including virtual digital assets, by or on behalf of the player”. Likewise, Rule 31C provides for the methodology to calculate the value of the supply of actionable claims when it comes to casinos.

The 2023 Amendment Rules provide, by way of an explanation, that a player’s winnings when used for playing in a subsequent game or other event without withdrawing, would not be considered for computing the value of the supply of online gaming (or actionable claims in the case of a casino).

Explaining the provision with respect to the exclusion of winnings, the Minister gave an example: if a bet was placed for Rs. 1000.00 and the player won Rs. 300.00, after which he placed a bet of Rs. 1,300.00, the GST would not be levied on the winnings, i.e., Rs. 300.00.