CBIC prescribes valuation rules for supplies made in online gaming and casinos

This Tax Alert summarizes the recent Notification ^[1] issued by Central Board of Indirect Taxes and Customs (CBIC), amending Central Goods and Services Tax Rules, 2017 (CGST Rules).

Earlier, Parliament had passed bills to amend the Central Goods and Services Tax Act, 2017 (CGST Act) and the Integrated Goods and Services Tax Act, 2017 (IGST Act) for taxability of supplies made in casinos, horse racing and online gaming ^[2].

Vide present Notification, Rule 31B and 31C are being inserted in the CGST Rules to provide for value of supply in case of online gaming and casinos as follows:

• Value of supplies made in online gaming (including supply of actionable claims in online money gaming) shall be the total amount paid, payable or deposited with the supplier in money or money’s worth, including virtual digital assets, by or on behalf of the player.
  
• Value of supply of actionable claims in casinos shall be the total amount paid or payable for (i) purchase of tokens, chips, coins or tickets for use in casino, or (ii) participating in any event.
• Any amount returned or refunded by the supplier to the player for any reason, including player not using the amount paid or deposited with the supplier for participating in any event, or towards return of tokens, chips, coins or tickets in case of casino, shall not be deductible from the value of supplies made in online money gaming or casino. 

An Explanation is also being inserted to clarify that for the purpose of Rule 31B and 31C, any amount received by the player on winning any event, which is not withdrawn and is used for playing in a further event, shall not be considered as amount paid or deposited with the supplier.

These Rules shall come into force on a date as may be notified by the Central Government.

Comments

• As discussed in the 51st GST Council Meeting, the Rules are likely to be made effective from 1 October 2023 along with the relevant provisions of the CGST Act.
  
• Levy of GST even in case where the player does not participate in the game or event after depositing the money, may negatively impact the industry.
• Industry may need to evaluate the legality of the Rules w.r.t. reduction in taxable value through issuance of credit note where the player withdraws the money by returning the chips etc. 
• Government may prescribe separate provisions regarding time of supply of actionable claims involved in online money gaming and casinos.

[1]  Notification No. 45/2023 – Central Tax dated 6 September 2023
 [2] Refer our alert “Parliament passes bills amending GST law for taxability of supplies in casinos, horse racing and online gaming” dated 14 August 2023