Let’s begin with how so far online gaming and Casinos has been put into 2 different spectra, skill and chance, under GST regime.

Games of skill are those where the outcome depends primarily on the player’s skill or knowledge, such as chess, poker, rummy, and fantasy sports.

For games of skill, the GST is calculated on the fees charged by the platform operator for providing access to the game. For example, if a platform charges a fee of Rs. 100 for access to a game of skill, the GST charged would be Rs. 18 (at the current GST rate of 18%).

On the other hand, games of chance are those where the outcome depends primarily on luck or chance, such as slot machines, roulette, and other casino games.

For games of chance, the GST is calculated on the gross gaming revenue (GGR) of the platform operator. The GGR is calculated as the total amount wagered by all players minus the total amount paid out in winnings. For example, if a platform’s total amount wagered is Rs. 1,00,000 and the total amount paid out in winnings is Rs. 70,000, the GGR would be Rs. 30,000. At the current GST rate of 28%, the GST charged on this GGR would be Rs. 8,400.

The differentiation between games of skill and games of chance is important because it affects the tax liability of online gaming operators. By taxing games of chance at a higher rate, the government aims to discourage such forms of gambling while promoting games of skill, which are seen as less harmful and more socially acceptable.

There have been ongoing debates on the classification of certain games as games of skill or chance, and the lack of clear guidelines has led to confusion and legal challenges in some cases.

As per this The Print article, The Madras High Court had already quashed a Tamil Nadu law banning online games such as rummy and poker, stating that every game has an element of chance and the games cannot be classified as purely games of chance. The court stated that games like rummy and poker involve a substantial amount of skill and strategy, and the player’s knowledge and decision-making abilities have a significant impact on the outcome of the game. The court further observed that the Tamil Nadu government’s ban on online gaming lacked justification and violated citizens’ fundamental right to carry on trade and business. The court also noted that online gaming companies must comply with all applicable laws and regulations, including paying taxes on their revenues.

On the other side of the table, a panel of the Group of Ministers (GoM) has recommended a flat GST rate of 28% on all online games, including games of skill and chance, based on the total stake value and not on the platform fee paid by the user. The panel has also recommended a flat rate of 28% on casinos based on the total value of chips bought at the time of entry, with no GST applied on the multiple round earnings or bets made with earnings from previous rounds. However, in the 47th GST Council Meeting, the Council has directed the GoM to re-examine the issues based on casino, racecourse, and online gaming based on further inputs from states and submit the report in a short duration.

The imposition of GST is not only limited to casinos and online gaming in India. The government is also charging resident tenants by imposing GST on rent as well. With that said, let’s look at the impact of GST on Casinos and online gaming in India.