28% GST on casinos, gaming: GoM finalises valuation technique

The Group of Ministers on casinos, online gaming and race courses under Goods and Services Tax (GST) in a meeting held Wednesday finalised its report detailing the valuation technique and a consensus on a tax rate of 28 per cent on these services. Meghalaya Chief Minister Conrad Sangma, the chairman of the panel, said the report will be submitted to Union Finance Minister Nirmala Sitharaman in a day or two and then the issue will be discussed in the next GST Council meeting.

The panel is learnt to have discussed several measures for taxing the revenue stream from casinos, race courses and online gaming including taxing the initial bid amount and gross gaming revenue (GGR). “The Group of Ministers (GoM) on casinos, race courses & online gaming has come to a consensus. The report of our submissions will be handed over to Hon’ble FM, Smti. @nsitharaman Ji in a day or two & the matter will be presented in the next @GST_Council Meeting,” Sangma tweeted.

In its previous meeting held earlier this month, the panel had unanimously decided on hiking the tax rate on these services to 28 per cent. At present, online gaming (without betting) attracts 18 per cent GST, while the ones involving betting along with gambling, race clubs, attract 28 per cent. State government officials estimate the annual turnover from the gaming services to the tune of Rs 30,000 crore.

Experts said taxing the items such as gaming and cryptocurrency will help the government to shore up revenues but it should be done as per international practice.

“The proposal to levy GST on the initial betting and gaming amount lacks clarity on valuation to be adopted for different gaming formats. Adopting flat rate and simpler valuation method on initial betting and gaming amount for casinos, racing and online gaming will result in absurd scenarios based on the format of playing the game (online or physical)…keeping game of skill and game of chance at par and taxing both the games at a sin rate of 28%; will be detrimental to the nascent Indian online gaming sector. Simultaneous change in valuation mechanism for levy of GST from platform services to entry fees/ contest amount will adversely reduce the prize pool to be distributed amongst the winners by approximately 30%. The proposal is deviation from the international practice of taxing the GGR. The observations of the GoM are not in line with the current legal position and international practices,” L Badri Narayanan, executive partner, Lakshimkumaran and Sridharan Attorneys said.

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