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Review of GST on online gaming, casinos likely next fiscal

ByRajeev Jayaswal
Sep 28, 2023 10:00 AM IST

The 50th Council on July 11 decided in favour of levying 28% GST on the full-face value of three types of bets under online gaming, casinos and horseracing

New Delhi: The Goods and Services Tax Council may review implementation-related issues pertaining to levying 28% GST on the face value of online gaming and casinos by the first quarter of next financial year, two officials said adding that some of these firms have approached various courts over their accumulated tax dues since 2017, and that the law will take its own course where these are concerned.

The Council may meet on October 7 to review changes in state legislations as agreed in its 51st meeting (FILE)
The Council may meet on October 7 to review changes in state legislations as agreed in its 51st meeting (FILE)

The 50th and 51st GST Council’s decisions were more of clarifications as there was no ambiguity even in past that online gaming with betting elements always fell in the highest slab of 28%, the officials added, asking not to be named. “As per the law, demands have been raised to all those online gaming firms that did not pay GST since 2017. Any kind of betting always attracted the highest GST rate. Naturally, those who did not pay the tax have accumulated dues along with penalties and interest,” one of them said, explaining why the tax demand appears disproportionately high.

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The 50th Council on July 11, 2023 decided in favour of levying 28% GST on the full-face value of three types of bets under online gaming, casinos and horseracing to put to rest the debate over “game of skill” versus “game of chance” that some companies were engaging in, the first person added; the former attract a lower GST rate of 18%. In its next meeting (51st meeting) on August 2, the Council approved necessary changes in laws to enforce the July 11 decisions to include online gaming and horseracing in schedule III as taxable actionable claims, he added.

The Council may meet on October 7 to review changes in state legislations as agreed in its 51st meeting. But the meeting has not been convened to discuss the mounting tax dues of certain online gaming entities, a second official said. “Aggrieved companies are well within their rights to appeal against the tax demand, but this need not alter the decisions taken by the Council on August 2,” this person added.

“As of now, any issue such as valuation methodology and tax rate for the sector will be reviewed by the Council only after six months of the implementation of 51st Council’s decision, which is expected by April or May next year,” the second person said.

PTI on Tuesday reported that fantasy sports platform Dream11 filed a petition in the Bombay High Court challenging the levy of 28% GST, retrospectively, on bets placed on its platform. The petition filed on September 22 follows Show Cause Notices (SCNs) slapped on the e-gaming platform by GST authorities. As per the petition, the tax demand is to the tune of 216.94 crore for 2017-18 and 1,005.77 crore for 2018-19. A host of online gaming companies and those in casino business have received similar SCN for non-payment of GST at 28% on full-face value of bets placed on their platform, according to PTI. GST authorities last week issued an intimation notice to casino operator Delta Corp and its subsidiaries for shortfall in GST payment of 16,000 crore.

In September last year, a similar SCN was served on online gaming company Gameskraft for recovery of 21,000 crore GST. The company approached the Karnataka High Court, which had quashed the SCN, the PTI report said. “The government has already appealed against the Karnataka High Court’s order and the matter is subjudice,” the second official said.

The Union finance ministry, the All India Gaming Federation (AIGF) and Dream 11 did not respond to email queries.

The first official said gaming and betting are not essential services and do not require tax concessions. “In fact, companies should not have any problem in paying 28% GST on full-face value as the tax is a pass through,” he added.

Ranjeet Mahtani, partner at consultancy firm Dhruva Advisors said: “There is no problem (for companies in paying GST). It is an indirect tax, and so the burden can be transferred to the customer.” He, however, added that “high rate of tax will eat into and erode the bet amount (pot or pool), and altogether dissuade patrons from online gaming”.

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