Online gaming, casinos set to attract 28% GST: All you need to know

The body chaired by union finance minister Nirmala Sitharaman decided that all large cars, irrespective of how they are popularly classified (as SUV or otherwise), will attract 22% cess, an additional levy imposed over and above GST. This will apply (on top of 28% GST) if the vehicle’s length exceeds 4,000 mm, has an engine of 1,500 cc and above and has a minimum ground clearance of 170 mm. This will, however, not cover sedans.

The council exempted cancer drugs and medicines for rare diseases as well as satellite launch services provided by private operators from the levy. It also lowered the service tax levied on food and beverages consumed in cinema halls to 5% from 18%.

Also read | Online gaming companies say only illegal platforms will gain from 28% GST

The council decided to impose 28% GST on the entire transaction value in the case of online gaming, horse racing and casinos. Moreover, GST on online gaming will be imposed without any differentiation of whether it’s based on skill or chance.

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‘Decision will impact FDI’

Sitharaman told reporters the government will amend the GST law for this purpose.”Online gaming, horse racing and casinos will be taxed at 28% each and they will be taxed on full face value,” she said. “For that there will be an amendment in the GST law to include online gaming.”

Officials said the government will introduce an amendment in the upcoming monsoon session to facilitate this.

The finance minister said the government does not intend to kill any industry but gaming and gambling cannot be taxed lower than essential goods.

“The moral question was also discussed… it does not mean they (online gaming) be promoted more than essential industries,” she said.

The industry said the move would be debilitating.

“This decision will have a chilling effect on the $2.5 billion of FDI (foreign direct investment) already invested by investors and jeopardise potentially any further FDI in the sector,” said Joy Bhattacharjya, director general, Federation of India Fantasy Sports (FIFS). “Further, this decision will shift users to illegal betting platforms, leading to user risk and loss of revenue for the government. We humbly request the GST Council and the government of India to reconsider this decision.”

On legal challenges mounted by some gaming companies against the levy of 28% tax on full value, revenue secretary Sanjay Malhotra said the government will continue to fight those cases in court.

“The 28% tax was always the case in online gaming. Today’s decision is only to clarify it and put an end to this debate,” he said.

The move follows recommendations made by a group of ministers (GoM) on taxation of online gaming, casinos and horse racing. It had deliberated whether to impose 28% GST on the face value of bets or gross gaming revenue (platform fees) and submitted its report in December last year.

Other key decisions

The council also decided to set up GST tribunals in phases and will notify rules for them by August 1. About 50 tribunals will be set up across the country and will start working in the next four-six months.

The apex body also approved various measures to curb fake GST registrations by mandating valid bank account details for GST registration and mandatory physical verification for high-risk registrations.

“Process of GST registration has been made a bit more rigorous to avoid fake registrations,” said Pratik Jain, partner, Price Waterhouse & Co LLP. “While this was perhaps necessary in light of several such cases which came to light recently, it needs to be ensured that the process is implemented in a manner which is not time consuming.”