Union Finance Minister Nirmala Sitharaman said the decision was not taken with consensus, as had happened at the time of the GST change on lottery, with some states registering dissent but most states asking for early implementation of the decision taken at the last Council meeting.
Although some states differed on the valuation norms and tax levy on online gaming and casinos, the Goods and Services Tax (GST) Council, in its 51st meeting via videoconferencing Wednesday, decided to levy 28 per cent tax at face value at entry level.
The Council, however, gave some relief by deciding not to impose the tax levy on the amount entered into games/bets out of winnings of previous games/bets in online money gaming or on total value of each bet placed, as would be the case in casinos.
Union Finance Minister Nirmala Sitharaman said the decision was not taken with consensus, as had happened at the time of the GST change on lottery, with some states registering dissent but most states asking for early implementation of the decision taken at the last Council meeting.
In its previous meeting on July 11, the GST Council had decided to levy a uniform 28 per cent tax on full face value for online gaming, casinos and horse racing.
The new tax levy is now expected to be effective from October 1. A review would be undertaken after six months of the implementation, Sitharaman, who heads the Council, said.
“The valuation may be done based on the amount paid or payable or deposited with the supplier by or on behalf of the player, excluding the amount entered into games bets out of winnings of previous games and bets, and not on the total value of each bets placed… (GST will be on) entry (level) whatever they pay to get chips and not what they pay in each game,” she said.
Citing remarks shared by the Meghalaya Chief Minister at the Council meeting, she also pointed out that the prevailing practice is of 18 per cent GST on gross gaming revenue or platform fee, which results in net revenue of only 8-9 per cent.
“Assuming today’s 18 per cent on GGR becomes 28 per cent on GGR, we will be collecting only around 11-12 per cent… at the current collections, it is far lesser than the tax we levy on some of the essential goods for households. This is gaming, you are wagering on it,” she said.
Giving an example, she said if a bet is placed for say Rs 1,000, and the player wins Rs 300, and if the player again places a bet of Rs 1,300, then GST will not be levied on the winning amount of Rs 300.
Officials would now work on the legal amendments, which are expected to be taken up in the ongoing monsoon session of Parliament, following which states will also pass respective amendments in the state GST laws.
“When the question of when to implement it came, October 1 is when it is expected, by which time the states will also pass the amendments to their state laws… because of the casinos, Goa and Sikkim kept appealing saying that they are small states and need to be given some consideration… The Council agreed today to come back after six months to review the way in which this is getting implemented. When I say six months, it’s not six months from today but six months from when this gets implemented,” Sitharaman said.
At least three states recorded their dissent during the Council meeting, with Delhi having asked for a complete review for online gaming. Goa and Sikkim asked for GST to be levied on gross gaming revenue even as they supported a higher 28 per cent rate, Sitharaman said.
Tamil Nadu, which has already banned online gaming, also asked for the legal amendment to take the ban into account such that online gaming does not become taxable in the state.
Revenue Secretary Sanjay Malhotra said that Tamil Nadu had some issues which will be resolved with them.
“It should not happen that by making these changes, online gaming also becomes legal. So we told them that betting is already liable to GST today in the Act. That does not make betting legal, if it is illegal, which it is. Betting and gambling are illegal in the country, other than horse racing and some specific cases… if betting and gambling are illegal but still liable to tax, just by including online gaming within the purview of the Act and making them liable to tax will not result in legalising online gaming in their state if they have banned it or they have made it illegal,” he said.
Other states such as Chhattisgarh, West Bengal, Maharashtra, Uttar Pradesh, Himachal Pradesh, Maharashtra, Gujarat, Karnataka, Bihar asked the Council to implement its decision from the last meeting at the earliest, Sitharaman said.
Offshore gaming platforms will have to register themselves with the GST authorities, Malhotra said, adding that in case they do not follow the law, the government will invoke the provisions of the Information Technology Act to block those sites. Any payments through virtual digital assets will also attract the GST rate of 28 per cent.
Meanwhile, the Centre filed a Special Leave Petition in the Supreme Court on Tuesday, challenging the recent Karnataka High Court ruling that quashed a Rs 21,000-crore show-cause tax notice issued to Bengaluru-based Gameskraft Technology Private Ltd (GTPL). The Revenue Secretary said a 28% tax on online gaming was always there and the Council is just clarifying the position and they would go by the Court decision on the matter.
A joint statement by The Federation of Indian Fantasy Sports and E-Gaming Federation said, “FIFS & EGF, which represent 50 Indian online gaming companies, appreciate the Government addressing the industry’s concerns on the issue of repeat taxation. 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.”
