GST Council to clear online gaming taxation law changes on 2 August

The Goods and Services Tax (GST) Council, which is expected to meet on August 2, will finalise draft rules on taxing online gaming, casinos, and horse racing, government officials told Business Standard.

Maintaining the earlier stance, officials said there is no review or roll-back of the proposed taxation concerning these entities on the agenda of the upcoming Council meeting.

At its meeting on July 11, the all-powerful Council decided to levy a uniform 28 per cent tax on the full face value or bet amount for these entities.

A senior finance ministry official told Business Standard that the Council has to approve the amendments proposed in the central GST Act and rules in line with the decision it has taken during the previous meeting.

The Centre was expected to bring in a legislative amendment to facilitate this during the ongoing monsoon session of Parliament, enabling the inclusion of online gaming and horse racing under actionable claims.

The meeting is likely to be held through videoconferencing, during which both the Centre and states would decide on various aspects of taxation, including the methodology of the face value on which the 28 per cent GST rate would be levied for online gaming, casinos, and horse racing, the official explained.

Sources said that a draft of rules is being prepared by the fitment committee (revenue officials from the Centre and states) and will be tabled during the meeting.

The draft rule is to be circulated to states, and accordingly, it will receive a final nod from the Council. It will then go to the Cabinet and finally to Parliament for amendments for implementation. Changes are also to be brought in the state GST law, according to officials.

Currently, most online gaming platforms pay an 18 per cent tax on the commission collected for each game. Those involved in betting or gambling attract a 28 per cent GST. For horse racing, GST is levied at 28 per cent on the total bet value.

Under the proposed norms, the said levy will be applicable to the face value of the chips purchased in the case of casinos and the full value of the bets placed with the bookmaker/totalisator in the case of racing.

Accordingly, suitable amendments are to be made to the law to include online gaming and horse racing in Schedule III as taxable actionable claims.

The Group of Ministers headed by Meghalaya Chief Minister Conrad Kongkal Sangma was tasked with examining the taxation of fantasy sports and casinos. The panel submitted two reports.

The first report submitted in June 2022 suggested that no distinction should be made between these activities “merely on the ground that an activity is a game of skill or chance or both”. Hence, tax should be levied on the “full value” of consideration, including the contest entry fee, paid by the player for participation in such games.

However, the panel was asked to relook into the suggestions. It could not arrive at a consensus in the second report, citing divergent views by certain states on tax rates.