GST on online gaming, casinos, horse racing likely to be hiked to 28%

The matter will be taken up in the upcoming GST Council meeting.
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The panel of ministers tasked to review the GST levy on casinos, race courses and online gaming has finalised its report, which will be taken up in the upcoming GST Council meeting. The Group of Ministers (GoM), chaired by Meghalaya Chief Minister Conrad Sangma, had in its previous meeting earlier this month unanimously decided on hiking the tax rate on these services to 28%.

The GoM met again on Wednesday, May 18, and finalised the method of valuing these services for the purpose of levying this tax. "The Group of Ministers (GoM) on casinos, race courses & online gaming has come to a consensus. The report of our submissions will be handed over to Hon'ble FM, Smti. @nsitharaman Ji in a day or two & the matter will be presented in the next @GST_Council Meeting," Sangma tweeted.

Other state ministers in the eight-member GoM include Maharashtra Deputy Chief Minister Ajit Pawar, Gujarat Finance Minister Kanubhai Patel, Goa Panchayati Raj Minister Mauvin Godinho, Tamil Nadu Finance Minister P Thiaga Rajan, Uttar Pradesh Finance Minister Suresh Khanna and Telangana Finance Minister T Harish Rao.

The industry had previously said that going through with the proposal could spell the death knell for most gaming companies in India. The Tax Research Unit (TRU) of the Department of Revenue of the Finance Ministry had recommended charging 28-30% of the gross Contest Entry amount. Currently 18% GST is charged only on the platform fee by gaming companies.

The E-Gaming Federation had said that the 18% tax rate on the commission (Gross Gaming Revenue or GGR) collected by online gaming platforms for each game that does not involve betting or gambling, is in line with global rates. “If the current taxation regime is revised and charged on stakes rather than gross gaming revenue (GGR), it will prove to be disastrous to the burgeoning potential of the Indian online gaming industry,” it said. 

Sameer Barde, CEO of the E-Gaming Federation, urging the government to maintain the rate at 18%, had said, “A higher tax burden will make the industry unviable. The gaming platform operators will be unable to continue operations at any meaningful level. Growth, innovation, employment opportunities, government revenues and most importantly responsible and safe gaming will be impacted in a big way. “

An industry source told IANS, "Currently, the platform margins range between 5-10% for all formats, except fantasy sports. Esports like chess, carrom, car racing, first-person shooter, etc. charge around Rs 8 for every Rs 100 rupees deposited by the user. This becomes the revenue for the gaming companies and the remaining Rs 92 rupees is paid back to the winner of the contest. Similarly, for skill-based cards games, platforms charge Rs 5-10 for every 100 rupees given by the user."

The source added, "Only in fantasy sports, the platforms charge around Rs 15 for every 100 rupees provided by the user. Therefore, if the TRU's recommendations are accepted, the GST liability on the gaming companies will be 2-3X of the revenue of gaming platforms, except for fantasy platforms."

With agency inputs

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