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The Finance Ministry has constituted a Group of States’ Finance Ministers (GoM) to look into GST-related matters related with casinos, race course and online gaming.
According to an office memorandum , Deputy Chief Minister of Gujarat Nitin Patel will be Convenor of the Committee. There are six members which include Ajit Pawar (Deputy Chief Minister of Maharashtra); Chowna Mein (Deputy Chief Minister of Arunachal Pradesh); P Thiagarajan (Finance Minister of Tamil Nadu), Amit Mitra (Finance Minister of West Bengal), B Bommai (Home Minister of Karnataka), and M Godinho (Transport Minister of Goa).
“The GoM shall submit recommendation to the Council within six months for consideration of the GST Council,” the OM said.
Four issues
The Committee has been given four issues to consider. It will examine valuation of services provided by casinos, race courses and online gaming portals and taxability of certain transactions in a casino.
This will be done taking into account the existing legal provisions and orders of Courts on related matters.
The Committee has been asked to suggest whether any change is required on the legal provisions to adopt better means of valuation of these services (casinos, race course and online gaming).
It will examine the administration of such valuation provision if an alternative means of valuation is recommended. It will also evaluate impact on other similarity placed services like lottery.
Commenting on the latest development, Harpreet Singh, Partner with KPMG, said, “Contrary rulings by High Courts on the matter of classification of poker as a game of skills vs. game of chance, divergent views on valuation for paying GST, that is, platform / participation fees vs gross value, ambiguity on what qualifies as actionable claims etc, have all added to the quandary, and hence the need for Government intervention,” said Harpreet Singh, Partner, KPMG.
Provisions and rates
Schedule III of CGST Act defines certain activities which are not taxable as the same are neither ‘supply of goods’ nor ‘supply of services.’ It includes ‘actionable claims other than lottery, gambling and betting’. Hence, actionable claim other than lottery, gambling and betting are exempt from levy of GST.
The GST rate applicable on online games involving betting or gambling is 28 per cent and GST rate applicable on games not involving betting or gambling is 18 per cent.
As per Rule 31A (3) of the CGST Rules, the value of supply of actionable claim in the form of chance to win in betting, gambling or horse racing in a race club shall be 100 per cent of the face value of the bet or the total amount paid. Here the rate is 28 per cent.
People involved with managing racing say, as GST is levied on value of bet and not on the commission, illegal betting is gaining prominence and hurting turf clubs financially.
They also quote 1996 ruling by the Supreme Court which held that horse racing is a game of mere skill within the meaning of Section 49 of the Police Act and Section 11 of the Gaming Act.
“Horse racing is neither “gaming” nor “gambling” as defined and envisaged under the two Acts read with the 1974 Act and the penal provisions of these Acts are not applicable to the horse racing which is a game of skill,” the apex court had said.
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