Online gaming, casinos liable to 28% GST since beginning: Revenue Secretary

As states like Delhi and Goa raised the issue of tax demand on online gaming companies and casinos retrospectively, Revenue Secretary Sanjay Malhotra on Saturday reiterated that 28% GST was levied on online gaming and casinos even before.

“Certain members had raised the issue of retrospective taxation. It was informed to them that this is not retrospective, and this was the law earlier. These liabilities already existed because money online games played with bets...They were already attracting (28% GST) by way of betting or gambling,” Malhotra told reporters.

In the 52nd GST council meeting, Delhi and Goa raised the issue of tax demands on e-gaming companies and casinos.

Delhi Finance Minister Atishi said tax notices for the past 6 years calculated at a much higher rate of 28% are being sent to online gaming cos, even though on October 1, this 28% GST was to be implemented.

“An industry whose revenue is Rs 23,000 crore, you are slapping a tax notice of Rs 1.5 lakh crore...this is to kill the industry. This shows an unsafe erratic investment environment in Indian startups,” Atishi said.

Malhotra further said that some states like Delhi and Goa raised the issue of online gaming companies facing GST demand notices for alleged evasion.

“There were discussions on charges (tax demand notice) on these companies, retrospectively. Because DGGI is an independent body, there cannot be any interference. The (GST Council) chairperson said she would make clarifications available to DGGI if required,” Chhattisgarh Deputy Chief Minister TS Singh Deo, also a member of the GST Council, said.

The GST Council in its meetings in July and August had decided to clarify the levy of 28% GST on full face value of bets placed on online gaming platforms and horse racing and casinos.

Online gaming, casinos and horse racing were classified as actionable claims, like lottery, betting and gambling, under GST with 28% tax. The amendments to Central GST and Integrated GST were approved by Parliament and were notified by the central government effective October 1.

States were also required to pass amendments to state GST (SGST) laws. So far, 18 states have passed the amendments either in their assembles or through ordinance. The remaining 13 states would also be passing the amendments, with effect from October 1 in due course.

Sharing his view on online gaming, Pratik Jain, Partner, PwC said, “We are not seeing the end of the matter. We will continue to see the litigation for the past period. What the government is saying is that we have not amended the law retrospectively. But in their view, in their reading, even earlier law, which was for betting, gambling and for things like game of skill, game of chance, all of that dispute they felt that it is a game of chance, and hence should be liable to 28% right from the beginning. Therefore, the notices have been issued.”

Meanwhile, the GST Council on Saturday decided to levy a lower 5% tax on millet-based flour when sold in pre-packaged and labelled form, Finance Minister Nirmala Sitharaman said. Flour, containing at least 70% millets, will attract nil GST if sold loose, and 5% if sold pre-packaged and labelled.

The 52nd GST Council meeting, chaired by the Union Finance Minister and comprising state counterparts, also decided to cap the maximum age of the President and members of the GST Appellate Tribunal (GSTAT). The GSTAT President will have a maximum age cap of 70 years, while the limit for members will be 67 years.

This is a change from the earlier age limit of 67 and 65 years, respectively, for the President and members of GSTAT.

The Council also decided to reduce GST on molasses to 5%, from 28%, and exempt alcohol for human consumption from the levy.

The GST Council decided to exempt Extra Neutral Alcohol (ENA), a key raw material for manufacturing alcoholic liquor for human consumption, from the goods and services tax (GST) giving states the exclusive right to tax the item, Finance Minister Nirmala Sitharaman said while briefing the media after the meeting. ENA manufactured for industrial purposes will continue to be under the ambit of GST and attract 18% tax.

MS Mani, Partner-GST, Deloitte India hailed the decision to leave tax on ENA to states.

"It is a state prerogative to tax alcoholic beverages. So in that light, if that decision to tax ENA is left entirely to states, it's an excellent decision," he told CNBC-TV18.