GST Council: 28% tax on online gaming, casinos and horse-racing

The GST Council, during its 50th meeting on Tuesday, made several decisions regarding tax rates for different goods and services. One of the key decisions was the implementation of a uniform 28 percent tax on the full face value of online gaming, casinos, and horse racing. On the other hand, the tax rate was reduced for uncooked/unfried snack pellets, cancer medicine, and imitation zari thread.

During the meeting, the Council also clarified the tax rate for food and beverages sold in multiplexes, and it provided a definition for all utility vehicles to ensure parity in cess levy. Finance Minister Nirmala Sitharaman emphasized that the intention was not to eliminate any industry related to online gaming, casinos, and horse racing. However, there were discussions about the moral question of whether these industries should be taxed at the same rate as essential items.

The tax would be applied to the full value of bets or the full value of consideration paid. The ministerial panel on online gaming, casinos, and horse racing had previously discussed an alternative option of taxing the gross gaming revenue or platform fee, which is the charge paid for gaming services. However, this option was not favored.

Finance Minister stated that the objective was not to eliminate any industry but to ensure that all types of businesses operate fairly. The decision-making process involved the participation of all states, which had been pending for the past 2-3 years. She emphasized the need to simplify the system and align it with the regulation of the Ministry of Electronics and Information Technology (MeitY). The tax on online gaming companies would be imposed without differentiating between skill-based games and chance-based games. The GST law will be amended to modify the definition of actionable claim accordingly.

Regarding online gaming cases that are currently under litigation, Revenue Secretary Sanjay Malhotra assured that the government will continue to fight those cases in court. He clarified that a 28 percent tax rate had always been applicable to online gaming, and the decision made during the meeting was simply to provide clarity and resolve the debate.

However, online gaming companies expressed concerns that the decision would negatively impact the industry by affecting gaming volumes and the viability of gaming companies.

Furthermore, the GST Council exempted GST on the import of cancer drug Dinutuximab, medicines used to treat rare diseases, and food used in Food for Special Medical Purposes (FSMP). Additionally, satellite launch services provided by private operators were also exempted from GST.

Food and beverages consumed in cinema halls will now attract a 5 percent GST rate, similar to the levy charged in hotels and restaurants, instead of the previously charged 18 percent for composite food packages in many cinema halls.

The Council also recommended the establishment of appellate tribunals from August 1, and various states presented demands for state-wise benches. The Council approved the setup of 40 benches in phases.

The definition of utility vehicles has been revised to allow for the imposition of a 22 percent cess on top of the 28 percent GST rate. The cess will be applicable to utility vehicles with an engine capacity of 1500 cc and above, a length of 4 meters and above, and an unladen ground clearance of 170 mm. However, sedans are not included in this definition.

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