Ahead of the implementation of new GST rules on the online gaming sector, the Karnataka government promulgated an ordinance to amend the Karnataka Goods and Services Tax (GST) Act to levy a 28% goods and services tax (GST) on online money gaming, casinos, and racecourses.

This comes following the assent of the ordinance by Karnataka Governor Thawar Chand Gehlot.

Given that the state legislature hasn’t been convened and no session is immediately on the horizon, the government chose the ordinance pathway to introduce these essential changes.

C Shikha, the Karnataka Commissioner for Commercial Taxes, told Moneycontrol that the state anticipates generating approximately INR 1,500 Cr through these amendments. “Karnataka is among the first major states to implement such an ordinance. Only a few states, such as Maharashtra and Haryana, have done so far,” she said.

The Karnataka government, in a clarification accompanying the GST Act changes, has distinctly communicated that these taxation alterations don’t override pre-existing laws which may ban, limit, or supervise activities like betting, casinos, gambling, horse racing, lotteries, or online money gaming.

Furthermore, the state government has stressed that charging GST on sectors like casinos, horse racing, and online money gaming doesn’t signal a legal endorsement of these sectors. Any illicit activities tied to these sectors will still face legal actions, notwithstanding the GST imposition.

Starting tomorrow (October 1), the GST Council’s resolution to impose a 28% GST on real-money gaming will take effect and will be reviewed after six months.

Subsequently, the Lok Sabha endorsed the changes to the Central and Integrated GST laws, imposing a 28% GST on the complete face value of stakes in online gaming, casinos, and horse race clubs.

Earlier this year, the GST Council publicised its plan to charge a 28% GST at the point of entry for online gaming. India’s gaming industry grappled with considerable disruptions post the GST Council’s resolution to slap a 28% GST on the total face value of stakes for real money gaming.

This resolution took a toll on several gaming entities. For instance, after the new GST regime was announced, gaming companies such as — MPL (Mobile Premier League) and web3 gaming newcomer Hike had to cut down on staff. Meanwhile, early to growth stage startups such as Quizzy, OWN, and Fantok temporarily halted their operations.