51st GST Council Meeting Highlights: 28% tax on online gaming

51st GST Council Meeting: 28% tax on online gaming

51st GST Council Meeting: 28% tax on online gaming : On August 2, the GST Council wavered slightly over technicalities and left the door open for a reconsideration in the future, but it remained committed to its earlier decision to apply a 28% tax on the entire face value of bets made on online gambling, casinos, and horse racing, with an eye toward putting it into effect on October 1.

Finance Minister Nirmala Sitharaman, who chaired the 51st GST Council Meeting, said the Centre would now strive to amend the Goods and Services Tax (GST) law in Parliament’s current session itself to enable the implementation of the levy, despite dissent from Sikkim and Goa over the modalities of the tax for casino users.

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Thangam Thennarasu, the finance minister for Tamil Nadu, expressed worries about how the tax might affect the state’s overall ban on online gambling. Ms. Sitharaman responded that this worry would be addressed in the law of the new regulations by expressly stating that the tax cannot be imposed when a ban is in place.

The representative of the Delhi government requested a new examination of the online gaming industry, but the Finance Minister said that the majority of other States were inclined to uphold the Council’s decision from last month, which had been reached after three years of study.

The online gaming industry, which had previously referred to the Council’s decision as a death knell endangering billions of dollars’ worth of investments and thousands of jobs in the sunrise sector, continued to express concern but appreciated a crucial clarification on the valuation rules for the 28% levy, which the Council approved.

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Simply put, if a person joins a casino by purchasing 1,000 chips, plays a round, and wins 300, the tax will only be assessed on the Rs 1,000 entry fee, according to Ms. Sitharaman. The E Gaming Federation and Federation of Indian Fantasy Sports expressed their satisfaction in a joint statement that this would allay their worries about “repeat taxation”. They further stated that, “The new tax framework, while clarifying and resolving uncertainty, will lead to a very burdensome 350% increase in GST and set the Indian online gaming industry back several years. However, it will allow gaming companies a fighting chance to innovate and rebuild the foundation of gaming in India.”

Goa and Sikkim [who wanted the 28% levy on casino bets to apply on gross gaming revenue and not the entire face value] kept appealing that they were small States and needed consideration, the Council agreed to come back after six months after implementation to review the way in which this is getting implemented.

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Sanjay Malhotra, the revenue secretary, made a suggestion that the review’s focus would likely be restricted to matters of valuation and tax rates, which may be altered by notifications and rules, while the GST law modifications would be more extensive “enabling provisions”.

For the new tax to take effect, States must also alter their own GST rules in addition to the central changes; however, Ms. Sitharaman expressed hope that it may go into effect on October 1.

Betting, gaming, and lottery are already listed as actionable activities under the GST law, so even if the amendments won’t be retroactive in the traditional sense, Mr. Malhotra highlighted that they are more of a clarification.

According to the Revenue Department, betting-only activities include internet gaming, horse racing, and casinos. The High Court of Karnataka dismissed a tax demand of 21,000 crore against Gameskraft Technologies, refusing to support that position. The Revenue Secretary declared, “We filed a request for special leave on the case and whatever the Supreme Court rules, will prevail.