The GST Council, while deciding on taxing casinos, horse racing and online gaming, appears to have taken the moral stand that these activities are harmful to people’s well-being and therefore need to be taxed in a manner that makes these unattractive to people. In the process, if additional revenue can be raised (by imposing GST at the rate of 28 per cent on these activities), it certainly doesn’t hurt. But tax laws need to do a fine balancing act between raising revenue and allowing businesses to grow and thrive.
The Council may have crossed the fine line by deciding to levy GST on the face value of chips purchased in casinos, full value of bets placed with bookmaker or in the totalisator in horse racing, and on the full value of bets placed on online gaming platforms. The group of ministers tasked with advising on this issue had recommended the rate of 28 per cent on these activities. The option before the Council was to either levy GST on the fee or commission charged by the casinos, horse racing clubs and online gaming platforms, or on the entire amount given by the punter to play or bet. The platforms were asking for the first option since the amount collected as betting money is redistributed among the winners. The Council may have decided on levying GST on the face value of the bets as that would be a more effective deterrent. But what this is likely to do is drive away punters as the 28 per cent GST on betting amount will add to the existing burden of commission/fee payable to the facilitator, and if the punter were to win, another 30 per cent TDS on the winnings. This reduces the advantages of playing on legitimate platforms, turf clubs and casinos and makes underground and overseas betting platforms more attractive.
The Turf Club of India has been pointing out that their business as well as tax paid to the government has been declining since the introduction of GST; casinos and online gaming portals could also witness similar trends once the current rules are enforced. With online gamers not averse to playing on unregulated platforms overseas and many of the users likely to shift to other unregulated betting activities with zero tax burden, the Centre’s hopes of raising further revenue may come unstuck. In sum, neither will punters be deterred from their activity nor will the state gain additional revenue. To achieve the twin objectives, it may have been a better idea to either levy 28 per cent GST on the fee or commission charged by platforms/race clubs or tax the betting amount at a lower rate of say, 18 per cent, which would be tantalising and yet forbidding.
The proposal to set up GST Appellate Tribunals and to set up benches across States is welcome as the litigations relating to GST are now being routed to the High Courts. Given the large number of such litigations and the need for better understanding of the GST law and the industry practices to settle these disputes, a GTAT will be far more effective