New Delhi: The Union cabinet on Wednesday cleared legislative changes needed to implement the GST Council’s decision to ensure that 28% GST is paid on the full value of amounts deposited by players for betting on online games, casinos and horse races, three people familiar with the development said.
The cabinet clearance to the bill enables the government to place amendments to Central GST laws in Parliament in the ongoing session, which is on till Friday. This is required to enable even state governments and two Union territories with Assemblies to clear amendments to SGST law in time for the new taxation to be enforced from 1 October.
In its 51st meeting, the GST Council decided that effort will be made to complete the process of making amendments to the Act at the earliest so that the changes come into effect from 1 October 2023. This can only happen once the Centre amends the CGST (including the amendment in Schedule III of CGST Act, 2017), IGST and UT GST laws, and states bring similar changes in SGST Acts.
The GST Council had on 2 August cleared the legislative changes needed at central and state levels for ensuring that 28% tax on the full value of bets is paid in these industries. The Council also then decided to exclude any winnings redeployed from the purview of indirect taxation and to review the new regime after six months of implementation.
In the meeting, the council also decided to require registration of offshore gaming platforms serving Indian consumers and to collect GST from them. Also, offshore online money gaming platforms not complying with this requirement will be blocked.
In a written reply to a Rajya Sabha question on Tuesday, finance minister Nirmala Sitharaman informed the House that it is anticipated that the levy of 28% GST on the full face value of bets, as recommended by the 50th GST Council meeting, will result in the increase of revenue from current levels.
According to Niti Aayog estimates, the online gaming segment grew by 28% in 2021 to reach $1.9 billion.
While the proposed law changes will bring clarity on the taxation of online gaming, casinos and horse racing, the Supreme Court will have the final word on tax demands raised so far under existing law.
The central government has also filed a special leave petition in the Supreme Court challenging a Karnataka high court order that gave a favourable ruling to the industry in a dispute with Gameskraft Technologies Pvt. Ltd.
The council did not yield to demands from the online gaming industry to levy GST only on their margins, called gross gaming revenues (GGR), but opted to levy it on the full value of amounts deposited.
The reworked levy on online gaming, casinos and horse racing is also expected to step up revenues of both the Centre and the states. Revenue secretary Sanjay Malhotra had earlier said that last year (2022-23), the exchequer collected only Rs1,700 crore as GST from the segments, and this could have been Rs15,000 crore-Rs20,000 crore had the tax been levied on the full value.
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