GoM on online gaming, casinos, horse racing broadly agrees on 28% GST; Goa differs

The GoM on online gaming, horse racing and casinos had a broad agreement that a 28 per cent GST should be levied on all the three supplies, but a consensus eluded on taxability of online games, as Goa suggested an 18 per cent tax on platform fees, sources said. A final view on taxation rate as well as whether tax is to be levied on gross gaming revenue (GGR) or fees charged by the platform; or on the full face value of bets put in by players of online gaming, horse racing and casinos would be taken by the GST Council on July 11.

Also, the Council, chaired by the Union Finance Minister and comprising state counterparts, has to decide on whether these three activities fall under the category of actionable claim of betting and gambling, sources added.

The Group of Ministers, convened by Meghalaya Chief Minister Conrad Sangma, has members from eight states– West Bengal, Uttar Pradesh, Goa, Tamil Nadu, Telangana, Gujarat and Maharashtra.

Of the eight states, West Bengal and Uttar Pradesh were of the view that a 28 per cent GST should be levied on all three supplies on full face value of the bets placed. Gujarat, however, was of the view that 28 per cent tax should be levied on platform fees.

Meghalaya was of the view that 28 per cent tax should be levied on GGR or platform fees or commission charged by casinos, online gaming and horse racing. It also suggested that a special mechanism to carve out an ‘Escrow Account’ for the purpose of pooling in prize money for payout to winners would make administration of the tax easier.

While Goa suggested a 28 per cent tax on gross gaming revenue of casinos, it said an 18 per cent GST on platform fee/service charge levied by platform operators, Goa said.

Goa also suggested that contributions to the prize pool may be treated as supply not liable for GST levy.

Tamil Nadu and Telangana have suggested that if the GST Council decides that the three activities are not actionable claims of betting and gambling, then 28 per cent tax should be levied on GGR.

Maharashtra, while suggesting a 28 per cent rate for all three supplies, said there should also be no differentiation in taxation on the basis of whether the activities are games of skill or chance and the valuation rules should reflect the same.

It proposed that a suitable abatement be provided for determining the taxable value of supply of the actionable claim. An actionable claim is typically referred to as a claim of debt.

In view of the divergence in views of the members, the GoM has left it on the GST Council to decide on the final taxation rate as well as valuation.

The GoM in its first report submitted to the GST Council in June 2022, had suggested that 28 per cent Goods and Services Tax (GST) be levied on full value of the bets placed. However, in its 47th GST Council in June last year, Goa raised certain reservations on the report and some other states too demanded that the report be revisited.

The GST Council then asked the GoM to relook into all the issues in the report. Following that the GoM met thrice and also conducted field visits and interacted with industry.