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GST on Online Gaming: GoM to tax casinos, gaming and horse racing separately

The Group of Ministers will seek legal opinion on the applicable rate and valuation base to be considered for levying of GST on online gaming, casinos and horse racing

GST on Online Gaming: GoM to tax casinos, gaming and horse racing separately
As per sources, the report will be presented in the next 7 – 10 days

The Group of Ministers (GoM) on Monday decided to tax horse racing, online gaming and gambling separately, delivering a win for the gaming industry. While the GoM is still undecided and has seeked legal opinion before submitting the final report of the goods and services tax (GST) levied on the industry, the report will no longer club online gaming with gambling. “GoM recognising the constitutional and legal difference and nuances of online games is very promising. We are hopeful that the GoM will arrive at a progressive and constitutionally sound recommendation for rate and valuation for our industry,” Roland Landers, CEO, AIGF, stated.

To give perspective, in July, the Group of Ministers led by Meghalaya Chief Minister Conrad Sangma presented a report recommending that online gaming activities should be taxed at flat 28% on the full value of consideration, without making any distinction between games of skill and chance. In Monday’s meeting, while the GoM did not reveal much of the taxation policy, they did clarify the distinction between gambling and gaming by separating the three categories. According to Sangma, the GoM would seek legal opinion on the applicable rate and valuation base to be considered for levying of GST on online gaming, casinos and horse racing. “After taking the opinion of stakeholders and after successive meetings to seek the suggestions of all members, we will take legal opinion before submitting the final report,” Sangma tweeted. 

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As per sources, the report will be presented in the next seven to 10 days. The government had formed the eight-member panel last year in May for better valuation of services of casinos, online gaming portals and race courses for levying GST. For Asish Philip, partner, Lakshmikumaran and Sridharan Attorneys, the shift in the perspective of GoM to consider different rates and valuation methods is a welcome change for the sector. “The GoM’s decision to seek representations and legal consultation from various stakeholders shall be helpful to explain the uniqueness of their games and align valuation mechanism with the practice followed. It is hoped that the taxability of games depends on established jurisprudence of game of skill and chance and internationally adopted practices,” he added.

The panel had earlier suggested a levy of 28 per cent GST on gross sales value on the basis that horse racing, online gaming and casinos are akin to betting or gambling. If the GoM’s new report levies 28% tax on gross gaming revenue/platform fee, the gaming industry will see 50-53% rise in taxation, as per industry estimates. Globally, the gaming industry pays anywhere between 10-20% as tax to the government, depending on the country’s taxation policy.

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