Government on Tuesday informed the Rajya Sabha that varied practices in levying GST by online gaming companies, casinos, and horse racing, and the resultant legal disputes led to recommendation of levying uniform 28 per cent GST on full face value.
GST Council, in its meeting on July 11, recommended that casinos, horse racing and online gaming to be taxed at the uniform rate of 28 per cent. Tax will be applicable on the face value of the chips purchased in the case of casinos, on the full value of the bets placed with bookmaker/ totalisator in the case of horse racing, and on the full value of the bets placed in case of the online gaming. On August 2, the Council gave a timeline of October 1 for the implementation.
On Tuesday, in a written response, Finance Minister Nirmala Sitharaman said that casinos are currently paying 28 per cent GST on Gross Gaming Revenue (GGR). Online gaming industry supplying actionable claims and some horse race clubs are currently paying GST at the rate of 18 per cent on platform fees/ commission, ranging generally from 5-20 per cent of the full face value, while some horse race clubs are paying 28 per cent on the full face value. GGR is basically service fee.
“These online gaming companies supplying actionable claims and some horse race clubs paying 18 per cent on platform fee/ commission are disputing the 28 per cent levy on actionable claims in the form of betting and gambling before various legal for a,” she said. It may be noted that Centre has moved to the Supreme Court against a ruling by the Karnataka High Court staying ₹21,000 crore tax demand against a online gaming company.
When asked about revenue implication, Sitharaman said: “It is anticipated that the levy of 28 per cent on full face value, as recommended in the 50th GST Council meeting will result in increase of revenue from current levels.” Earlier, Revenue Secretary Sanjay Malhotra in his media interviews had said he exchequer last year (FY2022-23) collected only ₹1,700 crore GST which could have been ₹15,000-20,000 crore had the tax been levied on the full value.
According to Sitharaman, at the time of launch of GST, state taxes on betting and gambling such as betting tax and entertainment tax were subsumed in GST. “It was a conscious decision of the GST Council to recommend 28 per cent tax on actionable the Council recommended to carry out amendments in the law to remove any ambiguity. “In the 51st GST Council meeting held on 2nd August, , a few states requested that the matter be reconsidered and after detailed discussion, the GST Council decided to continue with its decision taken in the 50th meeting,” she informed.
Now, the expectation is that the Government will move two bills during the ongoing session of the Parliament. However, if it does not happen, then the option of promulgating ordinance is available.
As per NITI Aayog estimates referred in the Draft National Policy for Growth of Animation, Visual Effects, Gaming, Comic and Extended Reality sector in India preprared by Ministry of Information and Broadcasting, the online gaming segment grew by 28 per cent in 2021 to reach $1.9 billion.