47th Council Meeting Expectations: 28% GST on Gross Value for Online Gaming, Casinos & Racecources

The 47th Goods and Services Tax (GST) Council, headed by Union Finance Minister Nirmala Sitharaman and representatives of states and UTs, is scheduled for 28th and 29th June 2022. The 47th GST Council meeting is happening after a gap of six months.

Sources said that the Council is expected to decide on the Group of Ministers’ (GoM) proposal of levying 28% GST on online gaming, horse racing, and casinos. Also, two GoMs will present reports before the Council.

The GoM, headed by Meghalaya Chief Minister, has recommended that online gaming be taxed at the full value of the consideration, including the contest participation fee. Sources say the GoM suggested charging GST on the full value of bets pooled in the totalisators and placed with the bookmakers, in the case of racecourses.

In the case of casinos, GoM recommended that the tax be levied on the full face value of the coins/chips purchased from the casino by a player. No further GST will apply to the value of bets placed in each betting round, including those with winnings in previous rounds.

Also, sources said that the GoM suggested that 28% GST be levied on access/entry fees into casinos, which compulsorily include foods and beverages. However, the optional supplies would be taxed at the rate applicable to such supplies.

Online gaming, casinos, and horse racing currently attract 18% GST. The Council had set up a panel of state ministers in May 2021 for better valuation of online gaming, casinos, and race course services. The GoM is likely to decide on the method of valuing the services.

The decision to increase GST to 28% on online gaming, casinos, and horse racing would make them at par with sin goods such as pan masala, tobacco, and aerated waters. However, charging GST on online gaming, casinos, and horse racing at gross revenue instead of net value will be a deviation from the global tax practices.

This GST hike proposal may increase the revenue, but it will encourage the unorganized sector and might lead to the unchecked generation of black money in the long term.

Apart from rate rationalization, the Council will likely discuss compensation to states amid the demand to extend it beyond the five years, ending in June 2022.

GST was introduced in the country on 1st July 2017, and the Centre assured states of compensation for any revenue loss due to the GST implementation for the first five years.

Though states’ protected revenue has been growing at 14% compounded growth, the cess collection did not increase in the same proportion. COVID pandemic further increased the gap between projected revenue and the actual revenue receipt.

The Centre has borrowed and released Rs 1.1 lakh crore and Rs 1.59 lakh crore to states as back-to-back loans to meet the resource gap of the states due to the shortfall of compensation. Recently, the Centre has released the entire GST compensation payable to states up to 31st May 2022.

For any clarifications/feedback on the topic, please contact the writer at dvsr.anjaneyulu@clear.in

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