The Goods and Services Tax (GST) Board is set to impose a uniform 28 per cent tax on the total value of online gaming, horse racing and casinos, in its 50th meeting .
The government is expected to table a legal amendment to move this forward. The measure will allow the inclusion of horse racing and online gaming in actionable claims.
What is the decision of the GST Council?
The uniform 28 percent levy will be applied to the face value of chips purchased at casinos. The full value of bets is placed in the case of online games, and for horse racing, the full value of bets is placed at the bookmaker.
The ministerial panel on casinos, online gaming and horse racing previously shared the alternative option of imposing taxes on platform fees or gross gaming revenue, i.e. the charge paid for accessing gaming services. However, this alternative option did not find acceptance.
The government is expected to issue amendments to the GST-related laws to include horse racing and online gaming in Schedule III as actionable claims subject to tax. Actionable claims, with respect to GST, are defined as property under the Central Goods and Services Tax Act, 2017. An actionable claim can be understood as an unsecured debt owed to any beneficial interest in movable property which is not actually owned by the claimant. .
Until now, betting, gambling and lottery were classified as actionable claims. However, horse racing and online gaming will now also be included.
Some state finance ministers at the Council meeting expressed surprise at the growing addiction to online games, especially among children. A uniform tax levy of 28 percent was actually a decision taken after the consensus of all states.
Union Finance Minister Nirmala Sitharaman heads the Goods and Services Tax Board. She claimed the motive was not to stop the industry, but it was the “moral question” about taxing both gambling and other essentials that led the Council to take the action.
“Our agenda is not to kill any industry… all types of businesses have to function… there was a discussion about the moral issue that, on the one hand, you don’t want to kill an industry. But that doesn’t mean they are given more incentives than essential goods…all states participated in this decision which has been pending for the last 2-3 years. We were able to take the decision because all states clearly participated in it,” the Union Finance Minister said.
Decision of the Group of Ministers (GoM)
A Group of Ministers was formed to oversee issues relating to taxes on horse racing, online gaming and casinos. The first report was presented by the Government of Mexico in June of last year. The report was then discussed in the GST Council in the 47th meeting.
In the first report of the Government of Mexico, a uniform rate of 28 percent was recommended for racetracks, online games and casinos on the total value of the consideration paid. The report also suggested that no distinction should be made for charging GST based on whether the activity is a game of chance, skill or both. However, when Goa raised reservations over the GoM report in June last year, the Council planned to review the report.
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