Kerala Raises Goods and Services Tax on Gambling to 28%
Date: 2024-02-18 Author: Dima Zakharov Categories: EVENTS
New GST Rate Implementation
In a major development for the Indian gaming industry, Kerala has raised the GST on gambling activities from 18% to 28%. This decision, signed into effect by Governor Arif Mohammed Khan, comes after amendments to the Central Goods and Services Tax Act 2017 and the Central Goods and Services Tax (Third Amendment) Rules 2023.
Scope of GST on Gambling
The increased GST rate applies to all payments made to online gambling companies, including casinos, horse racing, and online gaming. However, there is debate regarding whether it should be applicable only to the platform fee, as argued by Nishith Desai Associates.
Challenges and Legal Battles
Indian tax authorities are seeking to implement the 28% GST rate retrospectively, issuing show cause notices to operators for alleged GST evasion. These notices, totaling ₹1.12tn, have been challenged in various courts, with the Supreme Court set to hear the case in April 2024.
Impact on the Gaming Industry
The high GST rate may discourage smaller operators and startups in the gaming industry. However, industry experts believe that the overall impact on India's thriving gambling market may be limited due to its competitiveness.
Reasons Behind the Change
Kerala's decision to raise the GST rate is rooted in the state's reluctance to recognize certain games, such as rummy and horse racing, as games of skill. This difference in classification has led to conflicts between state and central government regulations.
What Lies Ahead
In 2024, the Indian gaming industry faces significant uncertainties, including the implementation of IT rules, litigations related to skill games bans, and the overall growth of the sector. India has the potential to become a hub for gaming developers, and the government is committed to regulating the industry to ensure fairness and protect gamers.
As legal battles continue and the GST rate takes hold, the gaming industry in India is in a state of flux, with the Supreme Court expected to play a pivotal role in shaping its future.
