No consensus in GoM report on GST framework for online gaming

An empowered group of ministers (EGoM) tasked by the Goods and Services Tax (GST) Council with looking into taxation of online gaming, races, and casinos could not arrive at a consensus on the valuation on which tax rate should apply.

The panel, headed by Meghalaya Chief Minister Conrad Sangma, submitted its second report to Finance Minister Nirmala Sitharaman ahead of the all-powerful GST Council meeting on Saturday.

Sources said that although the panel agreed to tax the supply of actionable claims at 28 per cent, it could not decide on the levy on the net amount (after removal of prize money) or the gross gaming revenue (GGR).

GGR is the total amount collected by casinos and online gaming companies before paying out the money to the winners.

The EGoM, in its first report, recommended that online gaming activities should be taxed at a flat 28 per cent on the full value of consideration, without making any distinction between games of skill and games of chance.

Sources aware of the matter said that the views of panel members were diverse. Notwithstanding several rounds of deliberation, they could not come up with a final conclusion on the issue. The Council will now take a call on a further course of action, they say.

Sources said the panel members also discussed whether to have different approaches or yardstick, given that casinos and online gaming work on different fundamentals. However, some states agreed to distinguish, while some states did not.

The panel is learnt to have considered the implications of the earlier proposal of taxing on face value and gross revenue.

It was argued that the financial implications of subjecting GST on GGR (according to industry estimates) are substantial. Taxation of online gaming or casinos at GGR creates a huge distortion in terms of tax differential between lottery (face value taxation) and these activities.

In the case of casinos, the EGoM had earlier recommended charging the highest GST rate of 28 per cent on the full face value of chips or coins purchased by a player. The chips may be used for buying items such as food and beverages as well.

However, Goa objected to the proposal, following which the GST Council asked for the matter to be raised in the June meeting.