GST Council to levy 28% tax on online gaming, horse racing and gambling

The Goods and Service Tax Council, on Tuesday, agreed to impose GST of 28 per cent on online gaming, horse racing and casinos. The tax will be levied on the full value of the bet made or the chips bought and there will be no differentiation between skill-based games and chance-based games.

In its agenda-packed meeting, the 50th held by the powerful body, the Council also decided to reduce the GST on food and beverages served in movie halls and multiplexes to 5 per cent from 18 per cent, clarified the definition of sports utility vehicles, provided exemptions to certain pharmaceutical products for treatment of cancer and other rare diseases, exempted GST on satellite launch services by private companies, and decided to start setting up GST Appellate Tribunals in state capitals and in cities which have high court benches.

In the meeting, a number of opposition states also sought clarity on GST Network being brought under the ambit of Prevention of Money Laundering Act, and some sought the expansion or extension of compensation to states.

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“The GST Act will be amended to include online gaming and horse racing. Very substantive discussions have taken place today, and earlier as well, on the matter of online gaming. All the states presented their views today, including Sikkim and Goa, which see a lot of tourism for casinos,” Finance Minister Nirmala Sitharaman told reporters after the Council meeting.

Sitharaman confirmed that there were talks on the issue of games of skill versus games of chance. “But that is not what we are looking at. We are purely looking at that which is being taxed. Because wagers are being placed, profit is being made,” she said.

Experts said the decision, based on the recommendations of a Group of Ministers, could be a death-knell for the online gaming industry.

“Ignoring the long-time demand of the gaming industry, levying a 28% tax rate on the gaming industry will be a big setback for Indian players. We might immediately see notices being issued to the gaming players for differential tax and with this new series of litigation,” said Ankur Gupta, Practice Leader - Indirect Tax at SW India.

“In most countries the online gaming industry is taxable more or less at par with the current taxability of 18%, therefore, it's a disadvantage for Indian game companies if the taxability moves to 28%,” Gupta said.

"We believe this decision by the GST Council is unconstitutional, irrational, and egregious. The decision ignores over 60 years of settled legal jurisprudence and lumps online skill gaming with gambling activities. This decision will wipe out the entire Indian gaming industry and lead to lakhs of job losses and the only people benefitting from this will be anti-national illegal offshore platforms,” said Roland Landers, CEO, The All India Gaming Federation.

Other decisions

Revenue Secretary Sanjay Malhotra, addressing the media alongside Sitharaman, said that SUVs will be taxed at 28% plus compensation levy based on three conditions: The length should be four metres plus, engine capacity should exceed 1500cc, and ground clearance should be 170mm or more unloaded.

Another existing condition, that the vehicle should be popularly known as an SUV, has been dropped. “This does not apply to sedans. Any personal utility vehicle meeting the three conditions will be taxed the applicable GST rate,” Malhotra said.

The council decided to exempt GST on medicines and food for Special Medical Purposes used in the treatment of rare diseases enlisted under the National Policy for Rare Diseases, 2021 when imported for personal use or by Centres of Excellence for Rare Diseases or the government.

“It has been decided that GST exemption on satellite launch services supplied by ISRO, Antrix Corporation and New Space India Limited may be extended to such services supplied by organizations in private sector also to encourage start-ups,” the Council said in a statement.

The Council was of the view that supply of food and beverages in cinema halls is taxable as restaurant service as long as they are supplied by way of or as part of a service and supplied independently of the cinema exhibition service, and hence the reduction to 5%.

On the issue of GST Appelate Tribunals, Sitharaman said that requests had come in for some 50 benches from all states combined. “We will not deny any of those requests, but hiring personnel for all these benches will take time. So to start with, we will set up tribunals in state capitals and in cities which have high courts. The work should begin in the next 4-6 months.”

Meanwhile, a number of states, including Delhi, Punjab and West Bengal, had opposed the recent move by the centre to bring GSTN under PMLA, with fears that even honest small and medium businesses could be troubled by the Enforcement Directorate.

Sitharaman and that the Revenue Secretary had given a detailed clarification on the matter in the meeting. “This notification (to bring GSTN under PMLA) has been issued because it is a requirement of the Financial Action Task Force. This will empower our authorities with more information. ED is not getting information or GSTN is not providing information on their own. It is the Financial Intelligence Unit which will decide what information to share,” Malhotra said.

Sitharaman said that Kerala and Chhatisgarh asked that the council take a look at expanding compensation since revenue growth has been tepid. She did not clarify if the body would take up the matter in future meetings.