26.07.2023: Council to decide on GST levy on entry or each bet for e-gaming

The proposal to levy 28 per cent Goods and Services Tax (GST) rate on online gaming, horse racing and casinos will be taken up in the GST Council to take a “final call” on whether it should be levied on the entry level or on each bet, Revenue Secretary Sanjay Malhotra said on Tuesday. However, he maintained that the GST rate on online gaming, horse racing and casinos continues to be 28 per cent on the full face value and not on the gross gaming revenue (GGR)/platform fee, as decided by the Council.

“That is the question (whether GST will be levied on entry level or every bet) which has been troubling the gaming industry. The gaming industry, they have various federations, all of them have met me, they have met others, we have taken their request on board. We are deliberating, the decision will be actually taken by the Council, the officers have met”

“There are pros and cons both ways as to whether we tax it at the entry level itself or we tax each and every bet, the taxation, as has been claimed by the gaming industry, becomes very high in case it is taxed at each and every bet. That’s true. It’s a fact, it’s true. And that will certainly be taken into account when the final decision on this is taken. It is not for me to take this decision, this decision is to be actually taken by the Council. But one thing is sure, what the Council has already decided, is that it will not be on the GGR. It will be 28 per cent and it will not be on the GGR, it will be on the face value. Now, whether the face value will be at entry level or whether it will be at each bet, that is a question which a final call will have to be taken by the Council and it will be taken shortly,” Malhotra said in an interview to news channel NDTV.

Meetings have been held with the industry representatives and federations, the Revenue Secretary said, adding that their concerns will be taken on board. “…and we should be able to arrive at a solution which is acceptable largely to all stakeholders,” he said.

The initial understanding after the GST Council decision was that the implementation framework will be decided in the rules to be issued by the finance ministry. On July 11, the GST Council had decided to levy a uniform 28 per cent tax on full face value for online gaming, casinos and horse racing.

On Monday, Minister of State for Electronics and IT Rajeev Chandrasekhar had said that there is no “difference” of opinion between the Finance Ministry and the IT Ministry on how the government should approach online gaming.

In his interview to NDTV on Tuesday, Malhotra said that the Revenue Department has not received anything in writing from the Ministry of Electronics and Information Technology (MeitY) on this issue. “As of now, we have not got anything in writing from MeitY…we do interact with them, we were even there in their inter-ministerial committee which had then finalised the regulations for the gaming industry. But we have not got anything in writing from them. As and when it comes, it will be looked into, it will be examined. However, I may say that they have been trying to distinguish between permissible games and games which are not permissible or recognised. Games have to be permissible, if a game is not permissible, then it cannot be played because it is not as per the law of the land,” he said.

During an interaction at the Express Adda last week, Chandrasekhar had said once the IT Ministry puts together the framework for permissible online games, it will approach the GST Council to reconsider their decision on levying the tax on the full face value of the bets placed on such platforms.

He said there have been some “bad actors” in the gaming space whose actions have conditioned the view that various states took in the GST Council. However, he pointed out that depending on how the tax finally gets interpreted, there is a chance that “smaller start-ups could quickly die and that is certainly not what our policy objective is”.

The Revenue Secretary’s comments come just days after top global and domestic investors including Tiger Global, Peak XV (formerly Sequoia Capital India) and Steadview Capital wrote to the Prime Minister, seeking to review the 28 per cent Goods and Service Tax (GST) on online gaming. They said that the decision will adversely impact $4 billion in prospective investments in the sector.

Before that, earlier in July, more than a hundred industry associations representing top gaming companies in the country including Dream 11 and Mobile Premier League issued an open letter to the government on the tax decision, saying that it has left the industry in “significant distress” and could have “devastating implications” for the companies, including a shut down of businesses.

Source: The Indian Express

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