Council to discuss tax rate for online gaming, GST on multiplex food and drinks

The GoM, in its first report in June 2022, had recommended a uniform 28 per cent rate for casinos, race courses and online gaming on the full value of the consideration paid (contest entry fee/bets pooled/coins purchased etc.).

It had also recommended that no distinction should be made for levying GST on the basis of an activity being a game of skill or of chance or both. After Goa raised reservations on the GoM report in June last year, the Council decided to review the report.

Following this, three meetings of the GoM were conducted in July, September and November last year, and the discussions revolved around two questions: whether the activities of race course and online gaming amount to betting and gambling or not in the context of various High Court and Supreme Court judgments; and how should the supplies of casinos, race courses and online gaming be valued — on the full-face value of bets placed or on Gross Gaming Revenue (GGR) (for casinos), totalisator fee (for race courses) and platform fee/GGR (for online gaming).

Member states have differed on the valuation norms, with West Bengal and Uttar Pradesh favouring tax for all the three activities on the full face value of the consideration paid, while Gujarat favoured online gaming to be taxed on platform fees. Maharashtra noted that these activities were fully taxable and suggested for no differentiation in taxation on the basis of the activities being games of skill or chance and the valuation rules to reflect the same. Telangana stated that if an activity constitutes betting and gambling, it should be taxed on the full face value and other activities may be taxed according to the existing provisions. Tamil Nadu stated that if an activity constitutes betting and gambling, it should be taxed on the full face value. It also said that if horse-racing and online gaming are games of skill and not actionable claims of betting and gambling, the mechanism of ‘escrow account’ and ‘operator account’ to distinguish between contribution to prize money and platform fees/service charge should be adopted for taxing them on GGR.

Goa suggested that casinos may be taxed on GGR and online gaming may be taxed on platform fees. Meghalaya, which is the convenor of the panel, suggested that casinos may be taxed on GGR. For online gaming and horse racing, it stated that the sum of money retained by the online gaming operator or the racing club is not part of the actionable claim, hence can be taxed at the rate recommended by the GST Council as supply of services.

The Council will now have to take a final view on taxation rate as well as whether tax is to be levied on GGR or fees charged by the platform; or on the full face value of bets put in by players of online gaming, horse racing and casinos. It will also have to decide whether these activities are actionable claims. The Group of Ministers, convened by Meghalaya Chief Minister Conrad Sangma, has members from eight states — West Bengal, Uttar Pradesh, Goa, Tamil Nadu, Telangana, Gujarat and Maharashtra.

Rate changes

The fitment committee under GST has recommended exemption for cancer medicine Dinutuximab imported by individuals among goods and exemption for satellite launch services provided by private players. Import of medicines, and food for special medical purposes used in the treatment of rare diseases for personal use and by centres of excellence are also likely to be exempted from Integrated GST. Currently, such imports attract an IGST of 5 per cent or 12 per cent.

Import of cancer medicine Dinutuximab (Qarziba) by individuals for personal use attracts 12 per cent IGST. The fitment committee has recommended that the medicine which costs Rs 36 lakh should be exempted from GST as patients usually raise money through crowdfunding.

The Council is also expected to clarify definition of Multi Utility Vehicles (MUV) or multipurpose vehicles or crossover utility vehicles (XUVs), bringing them at par with the Sports Utility Vehicles (SUVs) for levy of a 22 per cent compensation cess over and above the 28 per cent GST rate. The committee has recommended that all utility vehicles, by whatever name called, would attract 22 per cent cess provided they meet three parameters — length greater than 4-metre, engine capacity greater than 1,500 cc and ground clearance in ‘un-laden condition’ of more than 170 mm.

The fitment committee has also suggested the GST Council to clarify that food and beverages served in cinema halls be taxed at 5 per cent and not 18 per cent as was being done in some multiplexes. Karnataka had raised the issue and demanded clarity from the Council. The food or beverages served in a cinema hall is taxable as restaurant service, the committee has stated. However, if the sale of cinema ticket and supply of eatables such as popcorn or cold drinks etc. are clubbed and sold together, the entire supply should be treated as composite supply and taxed as per the applicable rate of the principal supply, which would be cinema ticket. Currently, movie tickets below Rs 100 are taxed at 12 per cent, while those above the threshold attract an 18 per cent GST.

For satellite launch services, public sector enterprises like ISRO, Antrix Corporation Ltd (ACL) and New Space India Ltd (NSIL) are exempt from GST. However, private players are required to pay an 18 per cent tax. The fitment committee has suggested that exemption should be extended to private players also with a view to provide a level-playing field.