Economy

GoM may veer around to levying GST on gaming revenue

Shishir Sinha | | Updated on: May 18, 2022

Online casino concept. Laptop with roulette, slot machine, casino chips and playing cards isolated on black background. 3d illustration | Photo Credit: Bet_Noire

Report to be soon submitted to the Finance Minister

A Group of Ministers (GoM) has agreed to recommend 28 per cent Goods & Services Tax on online gaming, casinos and horse racing. Sources said the recommendation is that the GST be levied on the Gross Gaming Revenue (GGR).

The GGR is basically the fee collected and retained by the service provider, such as an online gaming operator, as consideration for providing services and technology.

It is the only source of revenue for the operator. Similar arrangements exist for casinos and horse racing.

Meghalaya Chief Minister Conrad Sangma, who is also the convenor of the GoM, refused to divulge the details of the recommendation citing it has to be submitted to Finance Minister Nirmala Sitharaman followed by deliberations and decision in the GST Council, but he did confirm that recommendations have been finalised.

“The Group of Ministers on casinos, race courses and online gaming has come to a consensus. The report of our submissions will be handed over to Hon’ble FM, Smti  @nsitharaman Ji in a day or two & the matter will be presented in the next  @GST_Council Meeting,” he said in a tweet.

Earlier this month, the GoM arrived at a consensus on a flat 28 per cent GST rate for online gaming as also casinos and racing.

It met again on Wednesday and finalised the method of valuing these services for the purpose of levying the tax. Sangma said recommendations have been made keeping in mind the interests of the industry and the court rulings.

“All the decisions and recommendations we have made are based on existing laws, existing rulings from the Supreme Court and keeping in mind the entire uniformity that needs to be maintained in the sector as a whole. We also looked at growth of the different sectors. We also looked at aspects ensuring that entrepreneur and business has to consider,” he said. Further, he said the GoM has to take a consistent view and based on that the recommendations will be submitted.

Existing rate

As on date, online gaming has a dual rate of taxation — 18 per cent on games of skill (games not involving betting or gambling) and 28 per cent on games of chance (games involving betting and gambling). Most online gaming apps pay GST at the rate of 18 per cent. Both casinos and horse racing attract GST of 28 per cent.

Commenting on the latest development, L Badri Narayanan, Executive Partner, Lakshimkumaran and Sridharan, says it is important for the GST Council to adopt an appropriate rate and valuation mechanism. According to him, the well-established legal precedence prescribing treating a “game of skill” different from a “game of chance” should be taken into account by the Council before determining the GST rate and the valuation mechanism.

Published on May 18, 2022
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