Change in valuation one online gaming to hit major online gaming companies
The author can be reached at shaifaly.ca@gmail.com
In the recent developments, the government put a new valuation for online gaming. Recently they sent hefty notices to these companies. Now a whole scheme to fetch as much taxes government can is being prepared. The tax rate is increased to 28% and the valuation is changed.
Historically these companies book the revenue of the amount of their commission. Which is a small percentage of the whole bet. But now the new valuation will change this whole game of online gaming.
Table of Contents
First of all let us have a look at the rule 31B inserted for the valuation of Online gaming.
“31B. Value of supply in case of online gaming including online money gaming.– Notwithstanding
anything contained in this chapter, the value of supply of online gaming, including supply of actionable
claims involved in online money gaming, shall be the total amount paid or payable to or deposited with the
supplier by way of money or money’s worth, including virtual digital assets, by or on behalf of the player:Provided that any amount returned or refunded by the supplier to the player for any reasons
whatsoever, including player not using the amount paid or deposited with the supplier for participating in any event, shall not be deductible from the value of supply of online money gaming.”
Explanation.-
For the purpose of rule 31B and rule 31C, any amount received by the player by winning any
event, including game, scheme, competition or any other activity or process, which is used for playing by the said player in a further event without withdrawing, shall not be considered as the amount paid to or deposited with the supplier by or on behalf of the said player.”
Analysis of rule 31B for valuation of online gaming-
– The value will be the amount deposited with the supplier and not the amount put on bet.
– The amount deposited for credit points will also be included in this.
– The amount deposited but not used for gaming is also included in valuation
– The amount paid via virtual digital assets is also included in value
– The amount deposited and withdrawn by the customer is also included.
– Any amount won by a player and put to another bet without withdrawing is not included in value.
Explanation to Rue 31C and 31C.
i- Now there are some challenges in this valuation. Just because a rules inserted , something not a part of supply cant be made a part of supply. The amount of bet put by the players is not a supply. Here the supply is the facility of letting the players play a game. The supplier is charging a commission for this facility. How the entire amount of bet can be a supply for this? The same thing was done in the case of the lottery. Which is also under litigation.
ii- The amount deposited and even if it is withdrawn without putting it for a bet is also included in the valuation. If an amount is deposited in wallet by mistake and now the player wants to withdraw it, it will become the part of supply. This is again ultra vires of the definition of supply itself.
Expecting litigation in this area in future with lesser hopes for any breather. Let us see how it will turn?
In a major relief government has promised to not to apply the rate of 28% retrospective. But for the future the liability will be at 28% of total bet amount.Update from 52nd GST council meet on 7Th October 2023
CA Shafaly Girdharwal
CA
New Delhi, India
CA Shaifaly Girdharwal is a GST consultant, Author, Trainer and a famous You tuber. She has taken many seminars on various topics of GST. She is Partner at Ashu Dalmia & Associates and heading the Indirect Tax department. She has authored a book on GST published by Taxmann.
