The Goods and Services Tax (GST) Board is set to impose a uniform 28 per cent tax on the total value of online gaming, horse racing and casinos, in its 50th meeting .
The government is expected to present a legal amendment to advance this. The measure will allow the inclusion of horse racing and online gaming in actionable claims.
What is the decision of the GST Council?
The flat 28 percent tax will be applied to the face value of chips purchased at casinos. The full value of bets is placed in the case of online games, and for horse racing, the full value of bets is placed at the bookmaker.
The ministerial panel on casinos, online gaming and horse racing previously shared the alternative option of imposing taxes on platform fees or gross gaming revenue, i.e. the charge paid for accessing gaming services. However, this alternative option did not find acceptance.
The government is expected to issue amendments to the GST-related laws to include horse racing and online gaming in Schedule III as actionable claims subject to tax. Actionable claims, with respect to GST, are defined as property under the Central Goods and Services Tax Act, 2017. An actionable claim can be understood as an unsecured debt owed to any beneficial interest in movable property which is not actually owned by the claimant. .
Until now, betting, gambling and lottery were classified as actionable claims. However, horse racing and online gaming will now be included as well.
Some state finance ministers at the Council meeting expressed surprise at the growing addiction to online games, especially among children. A uniform tax rate of 28 percent was actually a decision made after the consensus of all the states.
Nirmala Sitharaman, Union Finance Minister, heads the Goods and Services Tax Council. She claimed the motive was not to stop the industry, but it was the “moral question” about taxing both gambling and other essentials that led the Council to take the action.
“Our agenda is not to kill any industry… all types of businesses have to function… there was a discussion about the moral issue that, on the one hand, you don’t want to kill an industry. But that does not mean that they are given more incentives than essential goods… all states participated in this decision that has been pending for the last 2-3 years. We were able to make the decision because all states were clearly involved in it,” said the Union Finance Minister.
Decision of the Group of Ministers (GoM)
A Group of Ministers was formed to oversee issues relating to taxes on horse racing, online gaming and casinos. The first report was presented by the Government of Mexico in June of last year. The report was then discussed in the GST Council at the 47th meeting.
In the first report of the Government of Mexico, a uniform rate of 28 percent was recommended for racetracks, online games and casinos on the total value of the consideration paid. The report also suggested that no distinction should be made for charging GST based on whether the activity is a game of chance, skill or both. However, when Goa entered reservations about the GoM report in June last year, the Council planned to revise the report.
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