28% likely GST on casinos, online gambling, horse racing on gross revenue: report


The almighty GST Council, at its meeting in Chandigarh this week, is expected to consider a proposal by the panel of state finance ministers to levy a 28% Goods and Services Tax (GST) on gambling in online, casinos and horse racing.

The 47th meeting of the GST Council, chaired by Union Finance Minister Nirmala Sitharaman and including representatives from all states and UTs, is scheduled for June 28-29. The Council is meeting after a six-month hiatus.

The GST Council will also be presented two reports from the Group of State Finance Ministers.

The group of ministers, led by the Chief Minister of Meghalaya, Conrad Sangma, recommended that online games be taxed at the full value of the consideration, including the competition entry fee paid by the player when registering. participation in the game.

In the case of racetracks, the GoM has suggested that GST be levied on the total value of bets aggregated in totalizers and placed with bookmakers.

In casinos, the GoM has recommended that the tax be levied on the total face value of chips/coins purchased from the casino by a player. No further GST would apply on the value of bets placed in each round of betting, including those placed with winnings in previous rounds.

In addition, the GoM has suggested that 28% GST be levied on entrance/access fees to casinos, which must include food/drinks, etc.

However, optional supplies, made independently of admission tickets, would be taxed at the rate applicable to such supplies, sources added.

Currently, casino, horse racing and online gaming services are subject to 18% GST. The GoM would decide on the method of evaluating the services.

In May 2021, the government had set up a panel of ministers of state for a better evaluation of the services of casinos, the online gaming portal and racetracks for the collection of the GST.

Rajat Mohan, senior partner at AMRG & Associates, said a 28% tax bracket for online gambling, horse racing and casinos would put them on par with many products of sin like pan masala, tobacco and carbonated waters.

“Taxing online gambling, horse racing and casinos on gross income instead of net value added would be a departure from global tax ethics,” Mohan said.

This proposal may soften the chessboard for a while; however, it would also attract the unorganized sector leading to a creeping generation of black money in the long run, he added.

The GoM interim report is expected to be discussed at the next GST Council meeting in Chandigarh.

Other 8-member GoM State Ministers include Maharashtra Deputy Chief Minister Ajit Pawar, Gujarat Finance Minister Kanubhai Patel, Goa Finance Minister Panchayati raj Mauvin Godinho, Tamil Nadu Finance Minister P Thiaga Rajan, Uttar Pradesh Finance Minister Suresh Khanna and Telangana Finance Minister T Harish Rao.

Along with the rate rationalization, the Council is likely to see a heated discussion over state payouts, with opposition-led states aggressively pushing for its continuation beyond the 5-year period that ends in June.

The GST was introduced in the country with effect from July 1, 2017 and states were assured of compensation for loss of revenue arising from the implementation of the GST for a period of five years.

Although protected state revenue grew at a compound growth of 14%, cess collection did not increase in the same proportion, Covid-19 further increased the gap between protected revenue and actual revenue, including including the reduction of cess collection.

In order to make up for the States’ lack of resources due to the short release of compensation, the Center borrowed and released 1.1 crore lakh in 2020-21 and 1.59 lakh crore in 2021-22 in the form of a back-to-back loan to make up some of the shortfall in collection of disposals.

The government has released the full amount of GST compensation payable to states until May 31, 2022.

With the contributions of the agency

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