Exploring the Impact of Kerala’s Amendment to GST Act on Online Gaming Industry

In a move to adapt to the evolving landscape of digital transactions and online activities, the Governor of Kerala promulgated the Kerala State Goods and Services Tax (Amendment) Ordinance, 2023. This ordinance introduces crucial amendments to the Kerala State Goods and Services Tax Act, 2017, aimed at regulating the burgeoning sector of online gaming, particularly online money gaming. This Notification was published on 05.02.2024.

One of the significant changes brought about by this ordinance is the introduction of definitions for “online gaming” and “online money gaming.” Online gaming now encompasses activities conducted over the internet or electronic networks, while online money gaming specifically involves the exchange of money or its equivalent, including virtual digital assets, with the anticipation of winning monetary rewards or virtual assets. Additionally, the ordinance extends the ambit of taxable transactions to include the supply of specified actionable claims, such as those related to betting, casinos, gambling, horse racing, lottery, and online money gaming. This expansion ensures that individuals or entities involved in facilitating the supply of these actionable claims are deemed as suppliers and are subject to taxation under the GST Act. Furthermore, the amendment addresses cross-border transactions by requiring entities supplying online money gaming services from outside India to individuals within the country to adhere to GST regulations. This move aims to regulate the influx of foreign online gaming platforms into the Indian market and ensure compliance with tax obligations. The changes also reflect in Schedule III of the principal Act, where references to “lottery, betting, and gambling” are replaced with “specified actionable claims,” aligning the legislation with the amended definitions. It’s essential to note that while the ordinance brings significant changes to the taxation of online gaming activities, it includes a transitory provision that respects existing laws governing betting, casinos, gambling, horse racing, lottery, and online gaming. This provision ensures that the amendments do not override or conflict with any pre-existing regulations governing these sectors. In conclusion, Kerala’s amendment to the GST Act marks a proactive step towards regulating the online gaming industry and ensuring fair taxation practices. As the digital landscape continues to evolve, such legislative measures are crucial in fostering transparency, accountability, and compliance within the sector.