Introduction
The levy of goods and services tax (GST) on online gaming has vividly captured the public imagination in the recent past. The debate has passionately stirred the stakeholders, attracting wide-ranging comments. The debate essentially arises from the GST Council’s recommendations for enactment of distinct and specific provisions for levy of GST on online gaming1 which have since been accepted and enacted by Parliament. This scheme came into effect from 1-10-2023. The enactment of these provisions notwithstanding, the debate has not yet subsided and there are multiple issues which are still awaiting clarity, considering that the Supreme Court2 is seized of the appeal against the decision of the Karnataka High Court which had examined the intricate issue in great detail.3 This post does not address any of the past and present issues and is solely focused on highlighting one nebulous issue which arises from the fact that the new provisions seem to affix the levy treating the activity to be goods. This aspect is noteworthy considering that GST law carries significant differences between “goods” vis-à-vis services so far as the levy, concomitant mechanics and procedural rules are concerned. Hence the importance of this aspect.
Review of the new statutory regime
It is expedient to examine the statutory scheme in order to appreciate the dynamics of the issue. There are two key legislations that require examination i.e. the Central Goods and Services Tax Act, 2017 (CGST Act) and the Integrated Goods and Services Tax Act, 2017 (IGST Act). Multiple amendments have been made in these enactments which require advertence. The former legislation contains the heart and soul of the GST regulations, whereas latter legislation inter alia contains rules relating to inter-State versus intra-State supplies, imports and exports, place of supply, etc.
1. Modification in scope of OIDAR services
Prior to the amendment, the IGST Act contained a definition of a unique species of supplies i.e. “online information and database access or retrieval” (OIDAR) services4 which included “online gaming”. After the amendment, the scope of OIDAR is pruned, wherein online gaming is retained but by “excluding the online money gaming”.5 Both these expressions are defined. It is provided that “online gaming means offering of a game on the internet or an electronic network and includes online money gaming”.6 Thus, online money gaming7 is a subset of online gaming. In other words, out of the larger basket of online gaming, it is only online money gaming which receives a differential treatment having been carved out of OIDAR. Thus, online money gaming is not taxed as services (under the umbrella of OIDAR services), even though online gaming continues to be a part of online gaming, which in turn is part of OIDAR services.
2. “Specified actionable claim” as a new species of “actionable claim”
There is another noteworthy amendment. This is to the treatment meted to “actionable claims” under the GST law.8 Prior to the amendment, “actionable claims, other than lottery, betting and gambling” were not subjected to GST and excluded from its levy.9 The underlying scheme of this exclusion was validated by the Supreme Court in its decision in Skill Lotto10 which confirmed the levy of GST on lottery tickets holding their exclusion from scope of actionable claim as legally valid notwithstanding the intrinsic traits of lottery tickets qua actionable claim.11
The Amendment makes two key changes in this respect. First, it introduced a new species of actionable claim, which are legislatively christened as “specified actionable claim”. This concept is statutorily defined to mean “the actionable claim involved in or by way of (i) betting; (ii) casino; (iii) gambling; (iv) horse racing; (v) lottery; or (vi) online money gaming”.12 Second, the scope of exclusion from GST is modified. Now, “actionable claims, other than specified actionable claim” are excluded from the levy of GST.13 In other words, “actionable claim involved in or by way of (i) betting; (ii) casino; (iii) gambling; (iv) horse racing; (v) lottery; or (vi) online money gaming” are subject to GST.
The aforesaid amendments also confirm that “online money gaming”, as one of the classes of specified actionable claim, is considered to be actionable claim. This aspect is significant because under the GST law, actionable claim is included within the scope of “goods”.14 Thus, online money gaming is also considered goods under GST law (as one of the categories of specified actionable claim) even though, as discussed above, online money gaming is a subset of online gaming which instead is services.
3. Inclusion of new entries in customs tariff
In addition to the aforesaid changes in the GST law, a parallel amendment in the customs law framework is noteworthy. This is an amendment to the First Schedule of the Customs Tariff Act, 1975. Colloquially this Schedule is also referred to as the import tariff as it is in terms of the rate of duty specified in this Schedule that the levy of customs duty is determined (subject to application of any exemption or other notification) in respect of goods imported into India.
The amendments to the GST laws have been notified into effect from 1-10-2023. Effective from the same date, the import tariff has been amended to insert new entries.15 These entries16 mirror the scheme of “specified actionable claim” under the GST law. Against each of the entries the prescribed customs duty is “nil”. Hence, this insertion may not per se result into levy of customs duty on these specified actionable claim. Nonetheless, this insertion confirms that specified actionable claim (which includes online money gaming) are treated as goods under the customs framework. This is because the scheme of customs law only governs goods17 and does not extend to services. In other words, even under the customs law, online money gaming is considered as goods.
4. Distinct scheme for levy of GST on cross-border online money gaming
As if the aforesaid complex stipulations were not overwhelming by themselves, there is another amendment in the GST laws insofar as the levy of GST on cross-border online money gaming is provided for under the amended law. For this purpose, the scheme of IGST Act has to be appreciated. Section 5 of the IGST Act is its charging provision which provides for levy of integrated tax on inter-State supplies of goods.18 Prior to the amendment, it further stipulated that “the integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of” the Customs Tariff Act, 1975 “at the point when duties of customs are levied on the said goods”. In other words, prior to the amendment, integrated tax on imported goods was levied under the customs law and not under the IGST Act.
This provision of the IGST Act has been simultaneously amended. Instead of the omnibus exclusion of all imported goods from the unamended scheme of the IGST Act, under the amended scheme, certain notified goods can be carved out from this mechanism, whereby the levy of integrated tax on such notified imported goods shall be under the IGST Act.19 The accompanying notification, curiously, notifies only online money gaming20 without notifying other classes of specified actionable claim.
In addition to the above change in IGST Act, simultaneously, as another amendment, a “special provision for specified actionable claims supplied by a person located outside the taxable territory” has been inserted in the IGST Act which obliges a person outside India engaged in “supply of online money gaming by him to a person” in India to “be liable to pay integrated tax on such supply”.21 In other words, even though online money gaming is considered a species of goods, unlike other goods, on the import of online money gaming the supplier is liable to pay integrated tax under the IGST Act.
As a net effect, the levy of integrated tax on cross-border online money gaming is under the IGST Act unlike other species of goods (including other classes of specified actionable claims) which are subjected to integrated tax under the customs laws.
Conclusion
Complexity is an innate trait attached to fiscal legislations. The aforesaid discussion regarding the levy of GST on online money gaming is a quintessential illustration of this trait. In addition, the circular logic of taxing online money gaming as goods vis-à-vis services, by first including them within the scope of services (under online gaming), thereafter including them within goods (as specified actionable claims) and further thereafter taxing their imports under a distinct charging provision unlike the other species of goods, only further adds to this complexity.
In addition, there is an inherent qualitative repugnancy in the aforesaid taxing scheme. This is because intrinsically online money gaming appears to be a service (which is confirmed by its statutory inclusion within the scope of online gaming). Nonetheless, online money gaming is taxed as goods. Furthermore, the mechanics for levying tax on imported online money gaming introduces a novelty insofar as, under the existing customs framework, the liability to pay tax upon import of goods is upon their Indian recipient (being the “importer”) whereas the non-resident supplier is liable to pay tax on import of online money gaming.
It will also be interesting to wait and watch if this juggling of online money gaming between goods and services has an impact on its taxability considering that the settled proposition in tax law jurisprudence that “the subject is not to be taxed unless the words of the statute unambiguously impose the tax on him”.22
†Advocate, Supreme Court of India; LLM, London School of Economics; BBA, LLB (Hons.) (Double Gold Medalist), National Law University, Jodhpur. The author can be reached at mailtotarunjain@gmail.com.
1. See generally, Press Release on 50th Meeting of the GST Council, 11-7-2023 <https://gstcouncil.gov.in/sites/default/files/press-release/Press_release_50.pdf> and Press Release on 51st Meeting of the GST Council, 2-8-2023 <https://gstcouncil.gov.in/sites/default/files/news-ticker/Press-Release-51-GSTC.pdf> enlisting these aspects.
2. Gameskraft Technologies (P) Ltd. v. Directorate General of Goods and Services Tax Intelligence 2023 SCC OnLine Kar 18. )
3. Directorate General of Goods and Services Tax Intelligence v. Gameskraft Technologies (P) Ltd., SLP(C) No. 19366-19369/2023, order dated 6- 9-2023.)
4. Integrated Goods and Services Tax Act, 2017, S. 2(17).
5. Integrated Goods and Services Tax Act, 2017, S. 2(17), as amended by the Integrated Goods and Services Tax (Amendment) Act, 2023.
6. Central Goods and Services Tax Act, 2017, S. 2(80-A), inserted by the Central Goods and Services Tax (Amendment) Act, 2023.
7. Defined in Central Goods and Services Tax Act, 2017, Ss. 2(80-A) and (80-B). It states: ‘online money gaming’ means online gaming in which players pay or deposit money or money’s worth, including virtual digital assets, in the expectation of winning money or money’s worth, including virtual digital assets, in any event including game, scheme, competition or any other activity or process, whether or not its outcome or performance is based on skill, chance or both and whether the same is permissible or otherwise under any other law for the time-being in force.
8. The expression “actionable claim” is defined in Central Goods and Services Tax Act, 2017, S. 2(1) to state that it “shall have the same meaning as assigned to it in S. 3 of the Transfer of Property Act, 1882”.
9. Central Goods and Services Tax Act, 2017, Sch. III Entry 6.
10. Skill Lotto Solutions (P) Ltd. v. Union of India, (2021) 15 SCC 667.
11. Sunrise Associates v. State (NCT of Delhi), (2006) 5 SCC 603.
12. Central Goods and Services Tax Act, 2017, S. 2(102-A), inserted by the Central Goods and Services Tax (Amendment) Act, 2023.
13. Central Goods and Services Tax Act, 2017, Sch. III Entry 6 as amended by the Central Goods and Services Tax (Amendment) Act, 2023.
14. Central Goods and Services Tax Act, 2017, S. 2(52) defines goods. It states, “goods means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply”.
15. In terms of Notification No. 72/2023-Customs (Non-Tariff) dated 30-9-2023 issued by the Central Government.
16. The newly inserted Heading 9807 refers to “Specified actionable claim” under which the following six entries have been inserted; “9807 10 00 — Actionable claim involved in or by way of betting; 9807 20 00 — Actionable claim involved in or by way of casinos; 9807 30 00 — Actionable claim involved in or by way of gambling; 9807 40 00 — Actionable claim involved in or by way of horse racing; 9807 50 00 — Actionable claim involved in or by way of lottery; and 9807 60 00 — Actionable claim involved in or by way of online money gaming”.
17. Customs Act, 1962, S. 17, dealing with “assessment of duty” only deals with “imported goods”. Furthermore, the expression “goods” is defined under Section 2(22) of the said Act. It states, “goods includes — (a) vessels, aircrafts and vehicles; (b) stores; (c) baggage; (d) currency and negotiable instruments; and (e) any other kind of movable property”.
18. In terms of Integrated Goods and Services Tax Act, 2017, S. 2(17), import of goods is also considered as inter-State supply.
19. Integrated Goods and Services Tax Act, 2017, S. 5 Proviso, as amended by Integrated Goods and Services Tax (Amendment) Act, 2023, S. 3.
20. Notification No. 03/2023-Integrated Tax dated 29-9-2023 issued by the Central Government.
21. Integrated Goods and Services Tax Act, 2017, S. 14-A inserted by Integrated Goods and Services Tax (Amendment) Act, 2023, S. 5.
22. Justice G.P. Singh, Principles of Statutory Interpretation (13th Edn., 2012) p. 829, citing Russell v. Scott, 1948 AC 422 : (1948) 2 All ER 1, Mathuram Agrawal v. State of M.P., (1999) 8 SCC 667.
