Online gaming industry awaits SGST law amendments amid GST clarifications

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Updated – September 30, 2023 at 07:07 PM.
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New Delhi

The Centre has set October 1 as the implementation date for GST clarifications in the online gaming, casino, and horse racing sectors.

Online gaming stakeholders express concerns about the delay in State Goods & Services Tax (SGST) law amendments, potentially leading to unilateral actions by states.

Online gaming players are apprehensive that no amendments have yet been made in SGST (State Goods & Services Tax) laws in the States, which could lead to unilateral actions. The Centre has notified October 1 as the appointed date for implementing laws to clarify the 28 per cent GST on online money gaming, casinos and horse racing.

Although, there is nothing in the GST law which prohibits the Centre from notifying amendments in law without States amending laws at their own end, considering the basic structure of GST, any change is implemented post-amendment by both the Centre and States/UT (with legislatures) so that there there emerges no legal issues.

The Centre has amended the CGST (Central Goods & Services Tax) and IGST (Integrated Goods & Services Tax) to implement recommendations by the GST Council to provide clarity on the taxation of supplies in casinos, horse racing and online gaming and issued notifications. However, more than a dozen States are yet to amend respective SGCT Acts.

“Only a few States are remaining (yet to amend SGST laws) and they will do so in few days,” a top Finance Ministry official told businessline.  However, this failed to convince online gaming players. 

AIGF’s plea for reconsideration

“It is humbly requested to kindly reconsider these notifications as this may open floodgates of unilateral actions in future by various states in various other aspects of GST thereby tearing apart the fabric of GST so carefully stitched together through a painstakingly built consensus between Center and the States by the then Finance Minister, the late Shri Arun Jaitley,” All India Gaming Federation (AIGF) said in a representation to Revenue Secretary Sanjay Malhotra, which has been seen by businessline.

Legal perspective

It highlighted a portion of the Supreme Court judgement in the matter of the Mohit Mineral case. The Apex Court quoted, with approval, the Kerala High Court judgment in Baiju vs. State Tax officer, “while explaining the ‘simultaneous’ nature of power held by Parliament and State legislature, it was observed that the power under Article 246A can be exercised simultaneously by the State legislature and Parliament and none hold any ‘unilateral or exclusive’ legislative power.”

The federation further argued that the Statement of Objects and Reasons of the Constitution (One Hundred and Fifteenth Amendment) Bill 2011 2014 Amendment Bill recognised a common national market for goods and services as one of the reasons for the amendment. “The above position of law was clearly acknowledged by the Revenue Secretary who, post the 50th meeting of the Goods and Services Tax Council, had clearly stated to the press that these amendments would be implemented after all the States pass their respective amendments,” it said.

Queries about GST treatment

The federation also raised some queries. “With around 15 States yet to make changes to their respective State GST laws, what would be GST treatment that ought to be adopted by online gaming companies registered in those States in relation to deposits received from players of those States? Since the amendments to the State GST laws are yet to be passed, the online gaming companies cannot charge SGST and can only charge CGST. Going forward, will the online gaming companies be penalised for not being able to charge the appropriate GST?,” it asked.

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