The GST council will discuss the Group of Ministers' (GoM) report on online gaming, casinos, and race courses and will also discuss law changes to facilitate provision for setting up the GST Tribunals, people in the know of the matter told CNBCTV18.

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The GST council had appointed a group of ministers for online gaming, casinos, and race tracks, taking into account the concerns of both the government and industry. The group concluded its final meeting on May 18, 2022, and submitted the recommendations to the GST council.

What are the recommendations?

-Imposition of GST on casinos, race courses, online gaming and lottery should be uniform both in rates and valuation norms

-For the purpose of levy of GST, no distinction should be made on grounds of the game of skill or game of chance

-The GST rate is to be hiked from 18 percent to 28 percent on all activities.

Also read: Sebi may turn to AI used in casinos to crack down on insider trading: Report

What is the Valuation?

In the case of online gaming, the full value of consideration, including the contest entry fee, is to be paid by the player for participation. While in the case of race courses, the full value of bets is to be pooled in the totalisator and placed with bookmakers.

For casinos, players are to purchase the full face value of chips/coins from the casino and once GST is levied on the same, no further GST to be applied to the value of bets placed in each round of betting including those played with winnings of previous rounds.

Entry fee to casinos including the price of one or more other supplies such as food, beverages, etc, to be valued at 28 percent. Any other additional service/optional supplies made independently of the entry ticket shall be taxed at the rates as applicable on such supplies.

Also Read: Key decisions that are likely to be taken at next week's 47th GST Council meeting

Speaking exclusively to CNBC-TV18, deputy chief minister Manish Sisodia said the issue of compensation is not only faced by Delhi and Punjab, most states are struggling for revenue.

He said states have surrendered rights to tax on the guarantee from the Centre and it's the duty of the central government to accept it and extend the window. Also, Sisodia said the Centre can repay the borrowing debt later from the compensation cess.

MS Mani, Partner at Deloitte India, said, "The exemption list has come a long way in the last 5 years or so. An exemption list even in other countries and other geographies of the world are reviewed typically every 3-4 years. So since we are on the cusp of 5 years, I think it is a good time to review the exemption list.

Some of the exemptions that are there today may have run the course. In our country, once we have something which is exempted, if there is a provision to tax that it creates a furor. So some of the exemptions may be pruned but we will have to wait and watch for the list that comes out. If these products no longer require an exemption and that helps to broaden the tax base, it helps in getting more people into the whole GST system as a whole then I think it makes sense to relook at the exemptions maybe every two years or so."

Abhishek Rastogi, Partner at Khaitan & Co, said, "Compensation cess was initially agreed through a constitutional amendment and other provisions to be levied for 5 years. Anything over and above a particular rate or beyond a period will be completely harsh for the industry.

So in such circumstances extending it beyond reasonable time or extending it beyond the expected rate is not a good sign at all. We must also consider that for two years due to the pandemic the economic situation was different and it was not foreseen at the time when the 5-year period was determined. Hence at this stage, any burden on the industry will create heavy losses to several sectors."

He said, "I think there will be some judicial intervention which will be required. When these online gaming companies were raided, we had taken such issues to the court very clearly putting the point across that coercive recoveries cannot happen at this stage when GoM has to come out with complete details. Of course, there are certain aspects with respect to valuations, for instance, if the full value of consideration is taxed then it will require judicial intervention and we will have to move court because actionable claim needs to be determined."

"Article 14 of the constitution comes into play as it is not just simply a game of skill versus a game of chance. Article 14 for discrimination will come into play because that is an important aspect and it will be very harsh for online gaming companies to be treated at par with casinos etc. So Article 14 also comes into play from the perspective of whether it is a game of skill or game of chance," Rastogi added.

Anwar Shirpurwala, CEO of the Federation of Indian Fantasy Sports (FIFS), said, "We are not able to understand why online gaming is being clubbed with betting and gambling. Legally there is a clear demarcation between online gaming and betting and gambling.

We have been making representations to the government for a very long time now and we have explained the entire system, the mechanism by which the entire online gaming works. So if both are placed in the same bucket, I think it is going to have an adverse effect to the industry and to the users as the grey market will proliferate."

First Published:Jun 26, 2022 12:38 PM IST