Lok Sabha Question No. 2825 (UNSTARRED), answered on 2023-08-07
Subject: Tax on Online Games
Ministry: FINANCE
Asked by: Umesh G. Jadhav, L.S. Tejasvi Surya, Prathap Simha, Annasaheb Shankar Jolle

## Government of India Ministry of Finance Department of Revenue

## LOK SABHA

## UNSTARRED QUESTION NO. 2825

TO BE ANSWERED ON MONDAY, AUGUST 07, 2023 SRAVANA 16, 1945 (SAKA)

## TAX ON ONLINE GAMES

2825. DR. UMESH G. JADHAV: SHRI L.S. TEJASVI SURYA: SHRI PRATHAP SIMHA: SHRI ANNASAHEB SHANKAR JOLLE:

Will the Minister of FINANCE be pleased to state:

- (a) whether the Government has levied any tax on online games and if so, the    details thereof;
- (b) the reasons for levying such a tax on the online gaming industry;
- (c) whether the Government has levied this tax based on the recommendations of any expert committee, if so, the details thereof;
- (d) whether the Government is cognizant of the impact that the tax will have on the online gaming industry, if so, the details thereof; and
- (e) the estimated revenue to be collected by the Government annually through the tax on online games?

## ANSWER MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI PANKAJ CHAUDHARY)

- (a):  Section  115BBJ  of  the  IT  Act  provides  that  where  total  income  of  an  assessee  includes  any income by way of winnings from online game, the income-tax payable shall be the aggregate of:
- i.  The  amount  of  income-tax  calculated  on  net  winnings  from  such  online  games  during  the previous year, computed in the prescribed manner at the rate of thirty per cent; and
- ii. The amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the net winnings referred to above.

Net winning is calculated after aggregating all winning (including losses) during the year. Section 115BBJ of the Act applies from 1 st April 2024 and is accordingly applicable for the assessment year 2024-25 and subsequent assessment years.

Section 194BA provides for tax deduction at source (TDS) at the rate of 30% on 'net winnings' from online games, at the time of withdrawal and at year end.

28% GST is levied on actionable claims in the form of betting and gambling supplied in online gaming.

(b) to (d): Earlier, income from online games was taxed under section 115BB of the Income-tax Act 1961 (the Act) and tax was required to be deducted under section 194B of the Act. As there had been a  significant  rise  in  the  number  of  users  of  online  games  and  multiplicity  of  games  being  played during  the  year,  there  was  a  need  to  bring  in  specific  provisions  regarding  TDS  and  taxability  of online  games  due  to  its  different  nature,  being  easily  accessible  vide  the  Internet  and  computer resources  with  a  variety  of  playing  options  and  payment  options.  Hence,  separate  provisions  were enacted for online gaming.

As regards GST, the rates and exemptions are prescribed on the recommendations of GST Council which  is  a  constitutional  body  comprising  members  from  Union  Government  and  State/UT Governments. The GST Council had set up a Group of Ministers on Casinos, Race Courses and online Gaming, whose reports were placed before the GST Council. After detailed deliberations, the GST Council in the 50 th meeting held on 11 th July,  2023 has clarified that actionable claims supplied in online gaming should be taxed at 28% of face value

(e):  No such estimates are available in respect of direct tax.

As regards GST, online gaming companies are currently paying GST at rate of 18% on platform fees ranging from 5% to 20% in general of the full face value. It is anticipated that collection of 28% on full face value will result in increase of revenue from current levels.

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