GST Council okays 28% tax on online gaming, casinos and horse racing

The effective tax rate on online gaming will be rolled out after amendments to the GST law. “Will bring an amendment to the GST law to include online gaming and (it) will be taxed at 28 per cent on full face value,” Finance Minister Nirmala Sitharaman said here. 

Currently, most online gaming platforms pay an 18 per cent tax on the commission collected for each game. Those involved in betting or gambling attract 28 per cent GST. For horse racing, GST is levied at 28 per cent on the bet value.

Explaining the taxability, the finance ministry said: “The said levy 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 racing.” It added that suitable amendments will be made to the law to include online gaming and horse racing in Schedule III as taxable actionable claims.

A Group of Ministers (GoM) headed by Conrad Sangma, chief minister of Meghalaya, was tasked with examining the taxation of fantasy sports and casinos. The panel submitted two reports to the Council.

The first report submitted in June 2022 suggested no distinction should be made between these activities “merely on the ground that an activity is a game of skill or chance or both.” And hence, tax should be levied on the “full value” of consideration, including the contest entry fee, paid by the player for participation in such games.

However, it was asked to relook into its suggestions. The panel could not arrive at a consensus in its second report citing divergent views of certain states on tax rates.

Following the meeting, Sudhir Mungantiwar, Maharashtra forest cultural and fisheries minister, said the Council decided to do away with the distinction of games of skill and games of chance in the case of online gaming for tax purposes.

Besides, the Council in its 50th meeting decided to put out the framework for setting up a GST appellate tribunal by August 1 for resolving GST-related litigation. It will be expanded from initial benches in state capitals in a phased manner. 

The Council also approved to tighten measures against excess input tax credit claims by businesses, along with strengthening the registration process to effectively deal with the menace of fake registration.

Compensation cess on some evasion-prone commodities has been deferred due to challenges in determining their retail sale price.

The Council also tweaked the definition of an SUV for attracting a cess beyond the GST rate. FM Sitharaman said currently the definition of an SUV for levy of cess includes four parameters — should be popularly known as SUV, should be of length of 4 meters or above, should have an engine capacity of 1,500 cc and above and unladed ground clearance of minimum 170 mm.

The Council has decided to scrap the condition that the vehicle should be popularly seen as an SUV, and stressed that the ground clearance of 170 mm should be of an unladen vehicle.

Also, GST rates have been reduced, clarified or regularised on some goods. On four items, rates have been brought down — uncooked, unfried snack pellets (from 18 per cent to 5 per cent), fish soluble paste (from 18 per cent to 5 per cent), and imitation zari threads or yarn (from 12 per cent to 5per cent); LD slag has been brought at par with blast furnace slag and fly ash (from 18 per cent to 5per cent).

“On five items, we have regularised for earlier periods when some paid, some did not pay due to classification confusion or duality of rates. The Council has taken a call on five such instances that payments for past are regularised,” Sitharaman said.

These include taxability of trauma, spino-implants is being regularised from July 18, 2022; raw cotton from agriculturist to co-operatives is taxable and for the past period of confusion. “We are regularising that and will not recover from taxpayers,” she added.

Speaking on the compensation released to states, Sitharaman said payments have been cleared to states which gave AG-certified claims. “There are some states whose statements are still awaited and those dues will be cleared, once we get them.”

During the meeting, the finance ministers of Delhi and Punjab raised the issue about the information that is going to be given by the GSTN under the Prevention of Money Laundering Act.

Revenue Secretary Sanjay Malhotra gave an explanation on this discussion, saying, “This notification has been issued under Section 66 of the PMLA and has nothing to do with the GST law. It is a requirement of the FATF compliance and it was clarified that the tax department will be the recipient of information.