GST Issues in Real Money Gaming Industry

The real money gaming industry, already facing regulatory scrutiny, has been targeted by the Goods and Services Tax (GST) authorities for non-payment of GST on cashbacks and bonuses provided to players. This move affects at least four gaming companies.

Key Issues

• The indirect tax department has sent communications regarding unpaid GST on bonuses and cashbacks.
• The gaming industry is concurrently dealing with a dispute over retrospective GST collection from 2017 to late 2023.

Bonuses and Taxable Value

• Companies offer bonuses to attract players, funding these from their own resources to cover GST on betting amounts.
• The GST department views bonuses or cashbacks credited to user wallets as taxable, considering them "amounts paid on behalf of players."
• Such credits are included in the taxable value as they can be used for gameplay.

Industry Reaction and Implications

• A senior official from a gaming platform indicated that the company received GST summons and is under pressure to make voluntary payments.
• The official believes the GST interpretation is flawed and plans to challenge it in the Supreme Court.
• Rule 31B of the Central GST Rules, effective since October 2023, is being used to demand 28% GST on bonuses.
• Legal experts argue the department's stance is untenable, as discounts should not be part of GST consideration.
• Companies are considering forming a "collective legal front" to contest the tax on bonuses.