Online games expected to generate 28% GST soon

A group of ministers (GoM) found merit in imposing a 28% Goods and Services Tax (GST) on online gambling to bring it up to the same level as levies on casinos, racetracks and gambling but has yet to formally submit its report to the GST Council, the final decision-making body, said two people with knowledge of the development.

The GoM, which has not yet finalized its official report, is expected to submit its recommendations to the Union Finance Ministry this week, the people said, asking not to be named. An eight-member panel, led by Meghalaya Chief Minister Conrad Sangma, is examining the tax structure of casinos, racetracks and online gambling.

“The Group of Ministers (GoM) on Casinos, Racetracks and Online Gaming has reached consensus. The report of our pleadings will be submitted to Hon’ble FM, Smti. @nsitharaman Ji in a day or two and the matter will be presented at the next @GST_Council meeting,” the GoM chief tweeted on Wednesday. Union Finance Minister Nirmala Sitharaman is the chairman of the GST Council. The ministry did not respond to a question about this.

According to the Council’s website, the GST on services, such as admission services to entertainment events or access to entertainment facilities, including the showing of motion pictures, theme parks, parks water parks, amusement rides, amusement rides, go-karting, casinos, racetracks, ballets, any sporting event such as Indian Premier League, etc. attract 28% GST. Similarly, services provided by a racing club by means of a totalizer or bookmaker’s license in such a club and gambling are also put on the top 28%.

One of the people quoted above said that the GoM will close all the legal loopholes and bring more clarity on the taxation of such things as the tax rate, the value on which the GST will be applicable and the tax on the amount of the gain.

Also, the same model could be extended to cryptocurrencies, which attract 18% GST.

On May 9, HT announced that the government could expand the indirect tax net on cryptocurrencies to cover the full range of activities, including their use for the exchange of goods and services, to a maximum of 28%. , as many parliamentarians demanded to treat them as au pairs. with lotteries and games of chance.

Saurabh Agarwal, tax partner at consultancy EY India, said the high GST rate in these sectors will boost revenue. “However, not all forms of online gaming should be considered for the 28% GST, as many such games are simply for entertainment,” he added.

L Badri Narayanan, executive partner at law firm Lakshimkumaran and Sridharan Attorneys, said the proposal to levy GST on the initial amount of bets and games lacks clarity on the valuation to be adopted for different game formats. “The adoption of a flat rate and a simplified assessment method on the initial amount of bets and games for casinos, races and online games will lead to absurd scenarios based on the format of the game and the mode of play (online or physical),” he said.

“Collecting tax on either the full entry fee/contest amount or the initial wallet deposit used as play money will result in different end results. This will result in tax being levied even on the actionable claims in the form of a prize pool to be distributed among the winners, where the service element is absent,” he added.