In a change of stance, the Centre has decided to pitch for differential taxation of online gaming, with “games of chance” to suffer a higher incidence of goods and service tax (GST) compared with “games of skill”.

According to an official source, all online games should not be considered games of chance or pay-to-earn. “There has to be a differentiation between games of skill and games of chance,” the source said, adding that the finance ministry will put forth its view when the GST Council takes up the report of a group of ministers (GoM) on online gaming, horse racing and casinos.

Although the final decision will be that of the Council, where both the Centre and states enjoy a veto, the ministry may recommend the highest GST rate of 28% for online games, where the winning is dependent on a certain outcome or, is based on pay-to-earn games. A lower rate, say 18%, may be recommended for games of skill.

Currently, an 18% GST is levied on online gaming on the platform fee. The GoM chaired by Meghalaya Chief Minister Conrad Sangma, in December last year submitted its report to the Union Finance Minister Nirmala Sitharaman. While it had proposed 28% on online gaming, there was no clear consensus on whether the tax should be levied on only the fees charged by the portal or the entire consideration. It subsequently decided to refer all decisions to the GST Council.

The GoM is unlikely to meet to review its report, another source indicated, adding that all views will be put forth at the GST Council when it takes up the report. As of now, a date for the next meeting of the Council has not been finalised but it is expected to meet in June.

Credit: Financial Express