Practical Application of GST on Gaming & Gambling vide Rule 31B & Rule 31C: Explanation with examples

Rule 31B of The CGST Rules inserted vide Not No 45/2023, provides for determining the Value of supply in case of online gaming including online money gaming. The same goes as follows-

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.

To explain with an example - Say a gamer deposits Rs. 1 Lakh before starting an online gaming session. He has to additionally pay Rs.28,000/- as GST. Thereafter he utilizes only Rs. 50,000 worth of his deposit, yet he will be refunded only Rs.50,000/- and not the proportionate GST of Rs.14,000/-.

Again, Rule 31C provides for Value of supply of actionable claims in case of casino as follows-

Notwithstanding anything contained in this chapter, the value of supply of actionable claims in casino shall be the total amount paid or payable by or on behalf of the player for-

(i) purchase of the tokens, chips, coins, or tickets, by whatever name called, for use in casino; or

(ii) participating in any event, including game, scheme, competition or any other activity or process, in the casino, in cases where the token, chips, coins or tickets, by whatever name called, are not required:

Provided that any amount returned or refunded by the casino to the player on return of token, coins, chips, or tickets, as the case may be, or otherwise, shall not be deductible from the value of the supply of actionable claims in casino.

To explain with an example - Say a better deposits Rs. 1 Lakh before starting an a betting session. He has to additionally pay Rs.28,000/- as GST. Thereafter he utilizes only Rs. 50,000 worth of his deposit, yet he will be refunded only Rs.50,000/- and not the proportionate GST of Rs.14,000/-.

The silver lining is in the explanation to 31B & 31C which provides as follows -

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.”

To explain with an example - Say a better/gamer deposits Rs. 1 Lakh before starting a betting/gaming session. He has to additionally pay Rs.28,000/- as GST. Thereafter he utilizes only Rs. 50,000 worth of his deposit, but wins Rs.5,00,000/-, he will take home as follows -

Hence, the proviso to Rule 31B & 31C seems to change the taxable event from ‘supply’ to ‘expected supply’. Even though an actionable claim is a beneficial ownership in debt, yet when no supply is received at all, the non-reduction of the refunded amount from the value of supply seems to stretch the taxability. However, the explanation to the Rules makes it clear that the GST Authorities seek to control only the entry point and not post that and hence even the prize money is not taxable, just like in case of a lottery.