The imposition of goods and services tax (GST) on online gaming is set to be deliberated by the GST Council during its upcoming meeting on July 11, as it seeks legal opinion on the matter.
Chaired by Union Finance Minister Nirmala Sitharaman, the GST Council is expected to discuss the report submitted by the Group of Ministers (GoM) concerning online gaming, horse racing, and casinos. Sources suggest that due to the lack of consensus within the GoM, an extensive discussion might ensue in order to reach a conclusive decision on the issue.
Furthermore, the GST Council has requested legal guidance on the application of GST to online gaming, which will also be presented during the meeting. "Numerous aspects regarding the imposition of GST on online gaming, such as fees or the entire consideration, as well as the differentiation between games of skill and games of chance, need to be thoroughly reviewed," stated an individual familiar with the matter.
The GoM, led by Meghalaya Chief Minister Conrad Sangma, proposed a 28% GST on online gaming in their report. However, they failed to reach a consensus on whether the tax should be levied solely on the fees charged by the gaming portal or on the entire betting amount. A subsequent review conducted last year also yielded no agreement. "The gaming industry is eagerly anticipating discussions on the GoM's report concerning the taxation of online gaming... Given the evolving regulatory and legal landscape surrounding online gaming, it is expected that the Council will review the taxability of this sector," commented Charanya Lakshmikumaran, Partner at Lakshmikumaran & Sridharan Attorneys.
Nevertheless, Saket Patawari, Executive Director of Indirect Tax at Nexdigm, cautioned that the Council might require more time to reach a final decision due to divergent views and the lack of consensus within the GoM. This is in addition to ongoing discussions with the Ministry of Electronics and Information Technology (MEITY), as well as the recent decision by the Karnataka High Court in Gameskraft Technology, which dismissed a demand of Rs 21,000 crore raised by the Directorate General of GST Intelligence.
The 50th meeting of the GST Council is also expected to progress the establishment of the GST Appellate Tribunal, a much-needed development for the industry. These tribunals, which were approved in the previous meeting, are projected to be established by the end of this year. The necessary amendments have already been made through the Finance Act of 2023. "The formation of the GST Appellate Tribunal is an eagerly awaited issue, as it will streamline GST jurisprudence and enable taxpayers to address their grievances regarding GST litigations. The GST Council should formulate rules in this regard and establish a definite timeline for the formation of GSTAT," expressed Bimal Jain, Chair of the Indirect Tax Committee at PHDCCI.
Additionally, there are expectations of a reduction in tax rates for various items, including millets and a cancer medicine. Clarity on the applicability of GST compensation cess on multi-utility vehicles is also anticipated, along with further clarification on the GST rate for food and beverages sold at multiplexes. However, the industry's request for a reduction in the GST rate on cement is unlikely to be addressed.
Sources indicate that the Council will review the recent crackdown on fraudulent GST registrations and explore measures to enhance GST revenues.
Moreover, the Council will address several procedural matters, such as implementing two-factor authentication for e-way bill and e-invoice generation, as well as automating scrutiny processes.
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