The GST Council, the all-powerful Constitutional body comprising the Centre and all the States, will meet on August 2 to finalise rules for implementing a uniform 28 per cent rate on online gaming, casinos and horse-racing. However, there is no proposal to reconsider the uniform 28 per cent rate.

“The Council will deliberate and approve the amendment in GST law in order to implement the decision taken by it in its last meeting to levy GST at the rate of 28 per cent on the face value in online gaming, casinos, and horse racing.” a source told businessline.  This amendment is required to make all three taxable actionable claims. Once amendments are approved, a bill is likely to be introduced during the ongoing Monsoon Session of Parliament to implement recommendations of the GST Council.

Schedule III of the CGST Act 2017 lists activities or transactions which are treated neither as a supply of goods nor a supply of services. Clause 6 of this schedule mentions “Actionable claims, other than lottery, betting and gambling.” Now after these three, online gaming, casinos and horse-racing to be added to apply GST.

On July 11, GST Council, recommended casinos, horse-racing and online gaming to be taxed at the uniform rate of 28 per cent. “Tax will be applicable on the face value of the chips purchased in the case of casinos, on the full value of the bets placed with bookmaker/ totalisator in the case of horse-racing and on the full value of the bets placed in case of online gaming,” the Council recommended.

This recommendation has attracted a lot of criticism, especially from the online gaming industry. It is claimed that this will end the industry. However, while giving details on recommendations of the GST Council, Finance Minister Nirmala Sitharaman had said: “It was a decision (28 per cent GST on online gaming, casinos & horse-racing) more from a moral point of view. Killing an industry (online gaming) is not on our agenda. The focus is to have a simplified system.”

Further, she added that the definition of online gaming will be in sync with the definition in the legislation being proposed by the IT Ministry. “Here, the aim is taxation only,” she clarified.

Revenue Secretary Sanjay Malhotra said GST is to be applicable at the time of making a payment for purchase of a chip or placing a bet. “For overseas companies providing online gaming facility here, we will ask a payment channel to collect tax, because payment has to be made here.”

Chairman of the Central Board of Indirect Taxes & Custom (CBIC), Vivek Johri, clarified that 28 per cent rate will be applicable each time one buys a chip or places a bet. “This has nothing to do with winning or losing,” he said, adding that services provided will attract taxes separately.

The decision has come after almost 2 ½ years of deliberation. Earlier, a Group of Ministers (GoM) was constituted to look into issues related to taxation on casinos, horse-racing and online gaming. It submitted its report last year, but was asked to look into all the issues once again. In its second report, it recommended that since a consensus could not be reached, the GST Council should take a call on it.

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