To tighten the noose around foreign companies, which may evade tax, the Council has proposed their mandatory registration with GST authorities. The government plans to invoke provisions of the Information Technology Act to ensure that access to consumers is blocked for those who do not register.
Finance minister Nirmala Sitharaman said that most states – from West Bengal and Chhattisgarh to Uttar Pradesh, Himachal Pradesh, Maharashtra and Karnataka – wanted the decision taken in the last meeting to be implemented at the earliest, resulting in the Council clearing the amendments to the Central law, which will be replicated by the states.
At Wednesday’s meeting, Delhi finance minister Atishi wanted the GST Council to review its earlier decision to tax online gaming, a proposal that was brushed aside by most states. Goa and Sikkim supported a higher levy but said the decision would hurt their interests, given the presence of casinos in the two states.
With Goa and Sikkim finding support from the others, such as Andhra Pradesh, it was decided to review the tax six months after implementation, said Sitharaman, who chairs the all-powerful body.
Tamil Nadu also flagged its concern on the tax since it has banned online games in the state and wanted the law to clearly specify that the levy will not nullify or dilute its position. With three states taking a different plea, instead of the unanimous approach of the Council, the Centre reminded the members that in a case related to lotteries, a vote had taken place in the past. The GST secretariat will work with the states and push the amendments “hopefully, in this session”, the FM said.
While Goa and Sikkim wanted the levy on the chips bought at casinos linked to the gross gaming revenue (GGR), Sitharaman said that the current 18% tax on GGR resulted in an actual tax incidence of 8-9%. An increase to 28% on GGR, as opposed to the face value, will translate into an incidence of 11-12%, she said, adding that it would be much lower than the 18% GST on several products that households consume.
“This is gaming, you are wagering,” Sitharaman said, while maintaining that it was not possible for the government to post officials at every roulette table in casinos. “A simpler alternative is 28% (GST) on the face value… there are practical difficulties also. With all this in mind and the collective wisdom of the house, it was decided we levy 28% on the face value,” she said.
The minister also clarified that only the initial value of chips or bets placed online will face the 28% tax and not the winning amount, ploughed back into betting or gaming. Revenue secretary Sanjay Malhotra said the amendments will specifically define online gaming, online money gaming, virtual digital assets used to pay for online games, and supplier in case of online gaming.
