GST on casinos, online gaming at 28% from Oct, to be reviewed in six months
Delhi, Goa and Sikkim raised objections, while West Bengal, Maharashtra, UP, Gujarat and others backed the move
Despite objections from the state governments of Delhi, Goa, and Sikkim, the union government announced on Wednesday that a 28% GST (Goods and Services Tax) will be implemented beginning in October.
The decision was made at the GST Council's 51st meeting, which was held digitally on Wednesday. Finance Minister Nirmala Sitharaman, who presided over the meeting, said that the decision was nearly unanimous, notwithstanding the opposition of a few states.
The finance minister of Delhi was opposed to the imposition of an online gaming tax. Furthermore, Goa and Sikkim desired that the tax be paid on the gross gaming revenue (GGR) rather than the face value. However, West Bengal, Bihar, Chhattisgarh, Uttar Pradesh, Himachal Pradesh, Maharashtra, and Gujarat have requested a 28% GST on face value as soon as possible, according to the Finance Minister.
Following the outcome of the 51st GST Council meeting, the E-Gaming Federation (EGF) and the Federation of Indian Fantasy Sports (FIFS) issued a joint statement. "EGF and FIFS, which represent 50 Indian online gaming companies, applaud the government's response to the industry's concerns about repeat taxation." While the new tax framework clarifies and resolves confusion, it will result in an extremely hefty 350% increase in GST, setting the Indian online gambling industry back several years. However, it would give gaming businesses a fighting shot to innovate and rebuild India's gaming base," it stated.
The move to levy GST on online gambling has elicited conflicting views. Some have praised the move, claiming that it will help to level the playing field between online and traditional gaming companies. Others have criticised the decision, claiming that it will raise the cost of online gaming for customers and stifle the growth of the Indian online gaming industry.
According to the All India Gaming Federation, the sector is worth approximately Rs 16,000 crore. Unlike any other industry, gaming companies face the potential of indirect taxes exceeding their own earnings, forcing them to substantially reduce their budgets.
Ankur Gupta, Practise Leader - Indirect Tax at SW India, commented on the taxation of internet gaming. He believes that this will be a huge setback for Indian players, as multiple notices will be issued, along with extensive litigation.
"Ignoring the gaming industry's long-standing demand, levying a 28% tax rate on the gaming industry will be a major setback for Indian players." If any exceptions are created, we will need to see the small print of the notification. "We may see notices issued to gaming players immediately for differential tax and with this new series of litigation," Gupta said.