GST Council Meeting 2023: GoM Imposes 28% GST on Online Gaming, Horse Racing, and Casinos

In the 50th meeting of the GST Council held on July 11, the Group of Ministers (GoM) has decided to impose a 28 percent GST on online gaming, horse racing, and casinos, without distinguishing between games of skill and chance. Finance Minister Nirmala Sitharaman announced this development.

FM Sitharaman stated, “The GST Council has determined that online gaming, casinos, and horse racing will be taxed at an entry point of 28 percent based on the full face value of bets.”

She further mentioned that changes will be made in the GST law to clarify that these three activities are not considered actionable claims, similar to lotteries and betting.

“The discussions held today by the GST Council on online gaming were substantive. The Council will ensure close collaboration with the Ministry of Information Technology to align with any regulations they introduce,” added the Finance Minister.

However, the effective date for the 28 percent GST levy on online gaming will be implemented after amending the GST law, clarified Sitharaman.

Furthermore, Sudhir Mungantiwar, the Minister of Forests, Cultural Affairs, and Fisheries in Maharashtra, announced that the council has decided to remove the distinction between games of skill and chance for online gaming.

Currently, both online betting and gambling attract a 28 percent GST, regardless of whether they involve skill or chance. Other games are subject to an 18 percent levy based on gross gaming revenue (GGR).

Regarding the GST Council’s decision, Sitharaman stated, “The intention of the GST Council is not to harm the online gaming industry or states with casinos. Some states have expressed their concerns. However, there is a moral question: Should we promote them more than essential goods? I am proud to say that the GST Council has deeply discussed and understood the complexity of the matter and made a decision that had been pending for 2-3 years.”

GST appellate tribunals to be established

GST appellate tribunals will be set up in phases. In the first phase, these tribunals will be primarily established in state capitals and locations where high court benches are present, as stated by FM Sitharaman.

Revenue Secretary Sanjay Malhotra emphasized that GST appellate tribunals should start functioning within the current fiscal year.

Items exempted from GST rates

Additionally, the GST Council has decided to exempt cancer-fighting drugs and medicines for rare diseases from the levy, according to the Finance Minister.

The Council has exempted GST on the import of the cancer drug Dinutuximab and Food for Special Medical Purposes (FSMP) used in the treatment of rare diseases.

Furthermore, GST on satellite launch services provided by private operators has been exempted.

Rates reduced for specific items

Rates have been reduced for four items, including fish soluble paste and LD slag, from 18 percent to 5 percent, Sitharaman informed.

Tax on food and beverages in cinemas will be 5 percent.

Increase in GST cess on MUVs

The GST cess on Multi-Utility Vehicles (MUVs) meeting specific length and engine criteria has been increased from the current 20 percent to 22 percent. This change will lead to a 2 percent increase in tax incidence for companies.

Crackdown on fake input tax credit

During the crackdown on fake input tax credit conducted by the taxation department, total tax evasion of Rs 17,000 crore was discovered, according to the Revenue Secretary.

Industry experts express dissatisfaction with GST on casinos, horse racing, and online gaming.

Industry experts have expressed their strong discontent with the GST Council’s decision to impose a 28 percent GST on online gaming and horse racing.

Ankur Gupta, Practice Leader (Indirect Tax) at SW India, said, “Levying a 28% tax rate on the gaming industry will be a significant setback for Indian players. We will need to carefully examine the details of the notification to see if any exceptions are created. We might witness immediate issuance of notices to gaming players for differential taxation, resulting in a new series of litigation.”

Sudipta Bhattacharjee, Partner at Khaitan & Co, commented, “This decision goes against the government’s vision to promote online gaming in India. The findings of the Karnataka High Court regarding the distinction between a game of skill and a game of chance have not been appreciated. It remains to be seen if the prescribed methodology for taxing online gaming will pass the test of constitutionality. In any case, this cannot be implemented retrospectively.”

The GST Council plays a crucial role in making decisions related to GST rates, rules, and regulations. Any changes to these policies require a consensus among the council members. The decisions made by the council can have significant implications for businesses and consumers across India.

In December, GoM convener and Chief Minister of Meghalaya, Conrad Sangma, submitted a report on the taxation of online gaming, casinos, and race courses to Union Finance Minister Nirmala Sitharaman. At that time, Sangma mentioned that the GoM did not reach a consensus and presented the report with divergent views. He further stated that the final decision lies with the GST Council.

The GoM in the GST Council, chaired by Meghalaya Chief Minister Conrad Sangma, consists of members from eight states: West Bengal, Uttar Pradesh, Goa, Tamil Nadu, Telangana, Gujarat, and Maharashtra.

Prior to the 50th meeting, the Office of Finance Minister Nirmala Sitharaman tweeted, “The 50th meeting is a significant milestone that demonstrates the success of cooperative federalism and the establishment of a good and simple tax regime.”

Before the 50th meeting, the council had already conducted 49 meetings and made approximately 1,500 decisions, demonstrating the spirit of cooperative federalism.

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