GST Council meet tomorrow, online gaming industry at crossroads

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The GST Council is scheduled to meet tomorrow and among the agenda items is the taxation of online gaming, casinos, and horse racing.

This will be the 50th meeting since inception of the council and will be chaired by Finance Minister Nirmala Sitharaman and is expected to be attended by the Union Minister of State for Finance besides representative Ministers of 28 States and 2 Union Territories with legislatures (Delhi & Puducherry) and advisor of UT of Jammu & Kashmir.

As per reports, the focus of the meeting will be the inconclusive report of the Group of Ministers (GoM) on Online Gaming, Casinos, and Horse Racing. There is a broad agreement that a 28 per cent GST should be levied on all three supplies, but there is no consensus on the taxability of online games, as Goa suggested an 18 per cent tax on platform fees, they said according to The Hindu Businessline.

In the 2nd Report accessed by G2G, the Goa government stated that adopting 28% rate on full value is impractical and will close down the businesses and pushing the business into the grey market. The Goa state argued that such a scenario will result in tax loss to the exchequer.

The Council in June 2022 directed the GoM to reconsider the 1st report after Goa raised concerns.  

Read more: Lottery lobby behind West Bengal decision to argue for higher tax on online gaming? 

The 2nd report detailed the stands of each of the member states. GoM member West Bengal argued to tax all actionable claims in the form of lottery. Lottery is currently taxed at 28% .

On online gaming front, Gujarat suggested that it should be taxed only on service charge (platform fee) for taxation purpose. West Bengal reiterated its original stand that all these activities whether online gaming or horse racing or casinos should be taxed at 28% on full value of bets placed.

Maharashtra expressed the view that actionable claims of online gaming are fully taxable under present provisions of GST Acts and there should be no differentiation on basis of game of skill and game of chance for the purposes of taxation.

Telangana, where all kinds of gaming for stakes are banned since 2017 argued that if an activity cannot be classified as betting and gambling, then tax at 28% on value as per existing provisions.

In conclusion, the GoM couldn’t arrive at consensus and referred the matter for GoM to decide. Consequently, tomorrow’s meeting will be crucial for the online gaming industry.