The Union Cabinet on Wednesday cleared a bill to amend laws to bring clarity related to the uniform 28 percent GST at full face value for online gaming, casinos, and horse racing, government sources confirmed. The statutes to be amended through the latest bill include CGST, IGST, and UT GST laws.
The bill is expected to be introduced during the remaining days of the monsoon session of Parliament. The GST Council, in its meeting on July 11, recommended taxing casinos, horse racing, and online gaming at the uniform rate of 28 percent. Tax will be applicable on the face value of the chips purchased in the case of casinos, the full value of the bets placed with the bookmaker/totalisator in the case of horse racing, and the full value of the bets placed in online gaming. The mechanism was further approved at the next meeting of the council on August 2.
Amendments and Recommendations
“Suitable amendments to be made to the law to include online gaming and horse racing in schedule III as taxable actionable claims,” the council recommends. Further, it recommended inserting a specific provision in IGST Act, 2017, “to provide for liability to pay GST on the supply of online money gaming by a supplier located outside India to a person in India, for single registration in India for the said supplier through a simplified registration scheme and also for blocking access by the public to any information generated, transmitted, received, or hosted in any computer resource used for the supply of online money gaming by such a supplier in case of failure to comply with provisions of registration and payment of tax.”
It was also said that the valuation of the supply of online gaming and actionable claims in casinos may be based on the amount paid or payable to or deposited with the supplier, by or on behalf of the player (excluding the amount entered into games/bets out of winnings of previous games/bets) and not on the total value of each bet placed. The council recommended that CGST Rules, 2017, may be amended to insert specific provisions for the valuation of the supply of online gaming and the supply of actionable claims in casinos accordingly. The council also recommended the issuance of certain notifications/amendments in the notification related to the issue.
Implementation and Impact
Once the Centre amends the CGST, IGST, and UT GST laws, then the states and two Union territories with Assemblies will be required to bring similar changes in SGST Acts. After the legislative changes, detailed rules will be announced. The target is to complete all these steps by the next month-end to ensure implementation from October 1, 2023.
On August 2, during a GST Council meeting, Delhi asked if the taxation matter, especially pertaining to online gaming, could be referred back to the group of ministers (GoM). Ministers from Goa and Sikkim called for a review of the 28 percent rate on the entire face value as against gross gaming revenue (GGR or service fee charged) in the case of casinos, as this would hurt their interests, given that they are small states. Andhra Pradesh reportedly called for a “large heart” to consider the valuation base. In view of these developments, the mechanism will be reviewed six months from the date of implementation.
The mechanism is expected to step up revenues. Revenue Secretary Sanjay Malhotra had earlier said that last year (2022-23) the exchequer collected only Rs 1,700 crore as GST, and this could have been Rs 15,000-20,000 crore had the tax been levied on the full value.
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