The much-anticipated GST Council meeting concluded on Saturday with a slew of clarifications for various industries. However, hopes for a review of the 28% Goods and Services Tax (GST) rate on online gaming and casinos were dashed, as Finance Minister Nirmala Sitharaman confirmed that the issue was not discussed.

Clarifications and Legal Amendments Take Priority

The Council, chaired by Sitharaman, primarily focused on resolving immediate issues and issuing clarifications on existing regulations. A significant decision was reached on the taxation of ENA, with the Council opting to amend the GST law to specifically exclude ENA used for making alcoholic beverages for human consumption. This move provides much-needed clarity for the industry.

Additionally, the Council discussed ways to effectively handle pending cases related to the anti-profiteering body, a key component of the GST regime designed to prevent unfair price increases.

Online Gaming Industry Left in Limbo

The news that the online gaming tax review was not on the agenda came as a blow to the industry, which had been actively campaigning for a reassessment of the 28% GST rate. Industry leaders and investors have been vocal in their criticism of the current tax structure, arguing that it is detrimental to the sector's growth.

Dr Aruna Sharma, Policy Advisor, Practitioner Development Economist, and Former Secretary to the GoI told Business Today, “Besides retaining a 28% uniform GST for all types of online games, the good news is that the tax rationalization Group of Ministers committee has been reconstituted and may review the tax on online gaming.”

“Regarding the issue of imposing a retrospective tax effective from July 17, the amendment in Section 11A now includes a clause that enables the waiver of retrospective tax due to ambiguities for both the State and the Center. It also allows for the waiver of penalties and interest on retrospective tax dues. There is no clarity or relief regarding the imposition of tax on the entire transaction value rather than just the income of the platform. The heavy taxation is likely to be passed on to the players. One recourse now is the much-awaited Supreme Court judgement that could give an optimistic decision favouring the imposition of GST only on the earnings of the platform, and not the money involved in real money games,” she added.

Next Steps and Future Outlook

While the GST Council has not announced a specific timeline for the online gaming tax review, it is expected to be taken up in a future meeting. In the meantime, the industry will likely continue to press for a more favourable tax regime. For now, the focus of the GST Council remains on streamlining the existing GST framework, providing clarity to businesses, and implementing necessary legal amendments through the upcoming Finance Bill.

Source: Business Today