Shishir Sinha | New Delhi, May 18 |
Suggests gross gaming revenue for computation
A Group of Minister (GoM) has agreed to recommend 28 per cent Goods & Services Tax on online gaming, casinos and horse racing. It also appeared to have agreed on recommending GST to be levied on Gross Gaming Revenue (GGR).
GGR is basically fee, collected and retained by the service provided such as online gaming operator for consideration of services and technology. It is the only source of revenue for the operator. Similar kind of arrangements exists for casinos and horse racing.
Chief Minister of Meghalaya, Conrad Sangma, who is also convenor of the GoM, refused to divulge the details of recommendation citing it has to be submitted to Finance Minister Nirmala Sitharaman followed by deliberations and decision in the GST Council, but he did confirm that recommendations have been finalised.
“The Group of Ministers on casinos, race courses and 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,” he said in a tweet.
Earlier this month, the GoM arrived at a consensus on a flat 28 per cent GST rate for online gaming along with casinos and racing. It met again on Wednesday and finalised the method of valuing these services for the purpose of levying this tax. Sangma said recommendations have been made keeping in the mind interest of the industry and court rulings.
“All the decisions and recommendations we have made are based on existing laws, which are in place, existing rulings from the Supreme Court and keeping in mind the entire uniformity that needs to be maintained the sector as a whole. We also looked at growth of the different sectors. We also looked at aspects ensuring that entrepreneur and business has to consider,” he said. Further he mentioned that GoM has to take a consistent view and based on that recommendations will be submitted.
As on date, online gaming has a dual rate of for taxation – 18 per cent on game of skill (game not involving betting or gambling) and 28 per cent on game of chance (game involving betting and gambling). Most of the online gaming apps pay GST at the rate of 18 per cent. Both casinos and horse racing attracts GST at the rate of 28 per cent.
Commenting on the latest development, L Badri Narayanan, Executive Partner, Lakshimkumaran and Sridharan, says it is important for the GST Council to adopt appropriate GST rate and valuation mechanism. According to him, the well-established legal precedence prescribing treating “game of skill” different from “game of chance”, should be taken into account by the Council before determining GST rates and valuation mechanism.
“The Council shall adopt the international practices in relation to valuation of GGR instead of adopting deemed value or entry fee. Adopting deemed value of supply is against the principle of transaction value, which will hinder innovation, encourage onshore gaming operators and discouraging new players and operators in the sector. The final decision of GST Council on the GST rate and valuation issue will decide the fate of start-up gaming platforms and rising gaming industry’s growth in India,” he said.