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Explained: Why online gaming could now attract a higher GST of 28%

Casinos, online gaming and race courses could soon attract a GST of 28 per cent. West Bengal Finance Minister Chandrima Bhattacharya said there is consensus among states that (on) these three, the highest rate of tax should be levied.

Written by Aanchal Magazine , Edited by Explained Desk | New Delhi |
Updated: May 31, 2022 11:20:42 am
State government officials estimate the annual turnover from the gaming services to the tune of Rs 30,000 crore. (Express Photo/File)

A Group of Ministers (GoM) formed to look into the tax rate on casinos, online gaming and race courses, has arrived at a broad consensus to levy a flat rate of 28 per cent on these services under the Goods and Services Tax (GST) regime.

View of the GoM

The panel has directed the officers to look into the modalities for valuation for levying the tax, after which the final meeting of the panel will take place by mid-May, West Bengal Finance Minister Chandrima Bhattacharya said.

“There is consensus among states that [on] all these three — online gaming, casinos and horse racing — the highest rate of tax of 28 per cent should be levied. The question now is on what will be the valuation on which the tax will be levied. For this purpose, the financial aspect, the legal aspect will be looked into by the group of officers of the fitment committee and they will be giving a report by 10 days. Then again in mid-May another meeting will be called by the Chairman (of the GoM),” Bhattacharya, who is a member of the GoM, told The Indian Express.

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The GoM will then finalise the method for valuation of these services. At present, online gaming (without betting) attracts 18 per cent GST, while the ones involving betting along with gambling, race clubs, attract 28 per cent. Now, all categories are likely to attract a higher levy of 28 per cent.

The government had in May last year set up the GoM for better valuation of services of casinos, online gaming portals, and race courses for levying GST. The terms of reference for the committee included valuation of services provided by casinos, race courses and online gaming portals, and taxability of certain transactions in a casino, taking into account the existing legal provisions and orders of courts on related matters.

The committee was also to suggest the need for any change in the legal provisions to adopt better means of valuation of the services of casinos, race course and online gaming and impact on other similar services like lottery.

The GoM, headed by Meghalaya Chief Minister Conrad Sangma, met on Monday (May 2) and discussed the applicable GST rate on these three services. The report of the GoM is likely to be taken up in the next meeting of the GST Council expected later this month.

Other state ministers in the 8-member GoM include Maharashtra Deputy Chief Minister Ajit Pawar, Gujarat Finance Minister Kanubhai Patel, Goa Panchayati Raj Minister Mauvin Godinho, Tamil Nadu Finance Minister P Thiaga Rajan, Uttar Pradesh Finance Minister Suresh Khanna, and Telangana Finance Minister T Harish Rao.

The 28% tax on these services

State government officials estimate the annual turnover from the gaming services to the tune of Rs 30,000 crore.

The Group of Ministers on lottery, which was constituted in January 2019, had in its report recommended that the rate and valuation of casinos, horse racing, online gaming may be referred to the Fitment and Law Committees.

The topic then featured in the 35th GST Council meeting in June 2019 and the 37th Council meeting in September 2019.

In the June meeting, the agenda listed a proposal on the need to define value for these services for taxation including defining methodology and procedure for deciding face value and bet amount and referring it to the Law Committee and Fitment Committee.

In the September 2019 meeting, the Fitment Committee considered a proposal for a reduction in wagering in horse racing from 28 per cent to 18 per cent, along with excluding prize money from the taxable value of horse racing. The fitment committee recommended a GST at the rate of 28 per cent with compensation cess of 115 per cent on the betting in horse racing which would make effective rate of taxation on face value at 18 per cent.

The GST Council in December 2019 levied a uniform 28 per cent GST on both state-run and state-authorised lotteries. Before that, state-run lotteries attracted 12 per cent GST, while state-authorised lotteries attracted 28 per cent GST.

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