Indirect Tax Alert - Recent Developments Pertaining to Online Gaming and Casino Industry

CBIC prescribes the valuation mechanism for ‘online gaming’ (including actionable claims involved in ‘online money gaming’) and ‘casino’ by inserting new rules

• Value of supply in case of ‘online gaming’, including actionable claims involved in ‘online money gaming’ (Rule 31B of the Central Goods and Services Tax Rules, 2017 (CGST Rules):
  • Value of supply shall be the total amount paid / payable to or deposited with the supplier, by way of money or money’s worth, including virtual digital assets (VDA), by or on behalf of the player.
  • The amounts returned or refunded by the supplier to the player (including for reasons that the player did not use the amount for participating in the event) shall not be deducted from the value of the supply of ‘online money gaming’.
• Value of supply of actionable claims in case of casino (Rule 31C of the CGST Rules):
  • Value of supply shall be the total amount paid / payable by or on behalf of the player for -
    • Purchase of tokens, chips, coins, or tickets, by whatever name called, for use in the casino; or
    • Participating in any event, game, scheme, competition, or any other activity or process, in the casino, where tokens, chips, coins, or tickets, by whatever name called, are not required.
  • The amounts refunded by the casino to the player on return of tokens, coins, chips, or tickets, as the case may be, or otherwise, shall not be deducted from the value of the supply of actionable claims in the casino.
• An Explanation has also been inserted which provides that the value of supply in both the above cases (under Rules 31B and 31C of the CGST Rules) shall not include any amount received by the player by winning any event, including game, scheme, competition, or any other activity, which is used for playing in a further event without withdrawing.
• The new rules would come into effect from a date to be notified.

[Notification no:45/2023-Central Tax dated 06 September 2023]

Hon’ble Supreme Court stays the application of the Karnataka High Court ruling in Gameskraft

The Hon’ble Karnataka High Court in M/s. Gameskraft Technologies Pvt. Ltd. Vs DGGSTI [TS-181-HC(KAR)-2023-GST]¹(High Court ruling) had inter alia held that ‘Rummy’, being a ‘game of skill’ is not classified as ‘gambling’ and hence, not leviable to GST.

Aggrieved by the above, the Tax Authorities filed a Special Leave Petition (SLP) before the Hon’ble Supreme Court. While hearing the SLP, the Hon’ble Supreme Court issued the notice to the Respondents and directed that pending further orders, there shall be an ad interim stay on the operation of the High Court ruling. The matter has now been listed to 10 October 2023.

[Directorate General of Goods and Services Tax Intelligence (HQs) and Ors. Vs. Gameskraft Technologies Pvt. Ltd. [Petition for Special Leave to Appeal (C) No. 19366-19369 of 2023], dated 6 September 2023]