Will the GST Council decide taxation on online gaming by voting of all states?

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The GST Council will next meet on December 17, 2022, in a virtual format. This will be the 48th meeting of the Apex decision making body in GST which meets every few months to update indirect tax aspects including the rates.

“The 48th Meeting of the GST Council will be held on 17th December, 22022 by video conference,” the GST Council tweeted late Friday evening.

The Council may decide on taxing online games, decriminalising certain offences, and setting up an appellate tribunal.

On taxing online games, the GoM may recommend a levy of 28 per cent on gross gaming revenue. As per reports, there is spilt in the GoM with few states seeking tax on gross gaming revenue while few states want the tax on full face value. Currently, skill gaming is taxed at 18 per cent.

In its first report, the GoM, headed by Meghalaya Chief Minister Conrad Sangma, recommended that online gaming activities should be taxed at a flat 28 per cent on the full value of consideration, without making any distinction between games of skill and chance. The Council in the 47th meeting directed the GoM to reconsider the issue. The industry has been eagerly waiting for a clarity on the same ever since.

But even the 48th meeting may not bring in any clarity. As per Regulation 5(2) of the Procedure and Conduct of Business Regulations of GST Council if a proposal has to be taken up for voting in GST Council, it has to be done through physical meeting and not through video-conferencing.

Till date all decisions were taken by consensus except in 38th meeting that related to increase of tax on lotteries from 18 to 28 per cent uniformly. In this meeting, after Kerala pushed for a division, States voted 21-7 in favour of the proposal. Earlier lotteries were taxed at two different rates of 28% and 18% based if lotteries are sold within the state or outside the state.

In the Council, the centre has 1/3 votes while the States have 2/3 votes. With number of States ruled by BJP, a division may tilt as per BJP decision. Apart from its own vote, centre needs support of at least 16 other member states/UTs to pass any proposal.

But even one state can push for a vote. This is what makes the decision uncertain at the next meeting.

Since the 48th meeting of GST Council on 17th December, 2022 is through video-conferencing, a decision may not be possible if any state opposes the proposal and demands that the motion be put to vote. In that case, the proposal will have to be deferred to the next physical meeting of the council as the regulations only deals with voting in a physical meeting. This will make the wait longer for the industry that is eagerly waiting for a clarity.