Revolutionizing Taxation: Exploring the Potential Benefits of 28% GST on Online Gaming, Horse Racing, and Casinos

The GST Council, in its 50th meeting on Tuesday, announced that online gaming, horse racing, and casinos would now be subject to a Goods and Services Tax (GST) rate of 28% based on the full face value. Finance Minister Nirmala Sitharaman, who chairs the GST Council, revealed this decision during a press conference in New Delhi. Additionally, amendments will be made to Section 3 of the GST Act to incorporate online gaming as taxable actionable claims. The bill containing these amendments is expected to be introduced during the upcoming Monsoon Session of Parliament.

Expanding the Taxable Scope

To clarify the tax applicability, the GST Council stated that the face value of chips purchased in casinos, the full value of bets placed with bookmakers or totalisators in horse racing, and the full value of bets placed in online gaming would be subject to taxation. This move has left the industry disappointed; however, Sitharaman emphasized that the intention behind the decision was not to stifle the industry. She highlighted the moral aspect of the matter and expressed that the industry should not receive more encouragement than essential goods.

Addressing Concerns

Revenue Secretary Sanjay Malhotra addressed concerns by mentioning that the tax rate on online gaming has always been set at 28%. He also stated that ongoing cases would continue, and the revenue department would appeal certain decisions made by the courts.

Federation of India Fantasy Sports has expressed disappointment regarding this decision. Federation’s Director General Joy Bhattacharya said, “We are disappointed that the GST Council and authorities have decided to levy 28% GST on the total entry amount including prize money. This decision will have a huge impact on the $2.5-million.” Billions of FDI have already been pumped in by investors and any potential future FDI in the sector has been put at risk. Moreover, this decision will lead users to migrate to illegal betting platforms, thereby posing a risk to the users and resulting in revenue loss to the government.

Industry Expectations vs. Reality

Abhishek Jain, National Head & Partner of Indirect Taxes at KPMG, expressed his opinion on the matter. He noted that although a detailed amendment evaluation would be necessary, the imposition of 28% GST on the full value goes against industry expectations. He stated, “This growing sector was expecting relief with clarification that GST would only be applicable to the platform fee earned by them.”

In conclusion, the GST Council’s decision to impose a 28% GST on the full face value of online gaming, horse racing, and casinos has stirred mixed reactions within the industry. While concerns regarding potential negative consequences and the industry’s growth have been raised, the council has emphasized the need for fair taxation without giving undue advantage to certain sectors. As the amendments to the GST Act are introduced and implemented, further developments in this matter will unfold.

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