GST Panel likely to propose earlier formula on rates on Online Gaming

The ministerial panel formed for casinos, race courses and online gaming under the Goods and Services Tax (GST) regime will refer back to the original report made available to the GST Council in June.

No significant changes to the already submitted report are anticipated, according to sources informed of the panel’s discussions. Input from discussions between officials and the Group of Ministers (GoM) held after June are likely to be incorporated as supplementary remarks in the report.

“It is unlikely that there will be any significant changes. The committee may revisit the first report itself,” the official said. Although the discussions have mainly focused on defining games of skill and games of chance, another perspective is emerging that the tax authorities may want to define gaming as a service rather than the current status of it being an actionable claim.

When it comes to betting and gambling, tax authorities should aim to concentrate on the taxes side of it rather than classify it as limiting or prohibitive. By using the authority granted by Section 7 of the CGST Act, the definition of online gaming as a claimable offence should be reviewed. After that, it can be classified as a service, just like building is, and the appropriate fee can then be assessed.

Whether it’s gambling or a game of skill, from a taxation perspective, tax prescription shouldn’t be dependent on a chance outcome or a skill outcome. A policy decision should be made regarding the rate to be charged, which could be 18%, 28% plus cess, or it could be based on gross gaming revenue. But the argument over whether a game is a game of skill or chance needs to end soon, according to a person with knowledge of the conversations.

Conrad Sangma, the chief minister of Meghalaya, and the eight other members of the ministerial panel had earlier presented a report to the Council, which was discussed at the meeting in June. Regardless of whether an activity is a game of skill, chance, or both, the GoM has advocated a standard rate of 28% on gaming establishments like casinos, racetracks, and online gaming.

The GoM had suggested that for purposes of valuation in the context of casinos, GST be applied at a rate of 28% on the full face value of the chips or coins that a player purchases from the casino, and that once GST is imposed on purchase of chips or coins (face value), no further GST would apply on the value of bets placed in each round of betting, including those played with winnings from prior rounds.

Additionally, it proposed a 28% GST on any services provided in exchange for payment of a consideration or admission fee, which must include the cost of at least one supply, such as food or drink.

The GoM received a 15-day extension following the 47th GST Council meeting in June due to issues made principally by the state of Goa. Following the meeting, Union Finance Minister Nirmala Sitharaman had stated that even as the GoM’s Chair, Meghalaya Chief Minister Conrad Sangma, delivered his report, he requested that the Minister of Goa (Mauvin Godinho, Goa’s Minister for Transport, Industries, and Panchayats Raj and Goa’s Member of GST Council), place his viewpoint before the Council rather than just the GoM. When the GoM last met in September, conflicting opinions about the system for valuing gaming, horse racing, and casinos were expressed.

The Council has not met since June, despite having originally planned to hold its 48th meeting in August. We’re anticipating the final reports from many GoMs. The GoM on Rate Rationalization has not yet completed its report, despite the fact that the GoM on Goods and Services Tax Appellate Tribunal has completed its recommendations. The following Council meeting will probably take place following the impending Himachal Pradesh and Gujarat state elections.