GST GoM report on online gaming, casinos, race courses finds no consensus, say officials

The much awaited GST Council nominated Group of Ministers (GoM) report on taxation of online gaming, casinos and race courses was submitted by convener—Meghalaya Chief Minister Conrad Sangma to union Finance Minister Nirmala Sitharaman on Thursday. Sangma, after presenting the report said that the GoM could not arrive at a consensus and has presented the report with divergent views. He further added that it is now for the GST Council to take a final view on the matter.

Meanwhile, CNBCTV18 reviewed a copy of the GoM report which highlights clearly that "GoM could not form a consensus".

Some of the divergent views by al the member states mentioned in the report, especially on online gaming say that "Goa has expressed the view that the 'contribution towards prize pool' may be treated as supply not liable to levy of GST." On the other hand, West Bengal and Uttar Pradesh have expressed to the GoM that "activities of online gaming may be taxed as supply of actionable claims in the form of betting and gambling irrespective of whether the online games involve betting on a game of skill or a game of chance."

According to the copy of the report reviewed by CNBCTV18, GoM member state Tamil Nadu has expressed that "in case a view is taken that horse racing and online gaming are games of skill and not actionable claims of betting and gambling, taxing the Gross Gaming Revenue (GGR) at 28 percent should be adopted and mechanism for determining the taxable value was also proposed."

The GoM in its report further mentioned that the panel tried to arrive at a broad agreement that supplies may be taxed at the highest rate of 28 percent but later on failed to reach at a consensus.

"Goa has further suggested that platform fees/service charge may be taxed at existing rate of 18 percent," the report has said.

Not just the rate, no consensus has been arrived at when it comes to the valuation, sources privy to the report said.

"Uttar Pradesh and West Bengal were of the view that the said activity may be taxed on the full value of bets placed on online games. Gujarat and Goa expressed the view that the same may be taxed on the platform fees. Maharashtra has proposed that suitable abatement be provided for the purposes of determination of taxable value of supply of actionable claim," sources added.

GoM also continued to debate on the difference between games of chance and games of skill, sources added.

The GoM report has also made it clear that the council can consider "levy of GST may be only on the GGR in case of Casinos and part of transaction what is relatable to service, where the services are commission/platform fee/Gross Gaming Revenue," sources added.

According to sources, another proposal made by the GoM after deliberations with states was to have an escrow account.

"In case of Race Courses and Online Gaming coupled with a desirable special mechanism to carve out escrow Account and then this escrow account can have the prize money pooled in, for the payouts to the winners, segregated from the amount collected toward commission or the platform fee, for the purpose of easy tax administration," sources added.

But, officials feel this will rather complicate the matter and will only lead to more litigation and tax money getting stuck at courts.

The GoM has also added that the member states have felt that considering the cascading effect of taxation not only on the main sectors of Casinos, Race courses and Online gaming, but also on the ancillary sectors and industries like tourism, transport, entertainment, etc. for its viability and long term growth prospects in the larger interest of our economy, having an escrow account facility can help, sources added.

But, senior officials, CNBCTV18 spoke to on the proposal, rather disagreed and continued to feel that these are just ways and means to keep taxation policy more complicated to avoid tax payouts by the industry.

In the end, the GoM is of a view that "No consensus could be reached on whether the activities of online gaming, horse racing and casinos should be taxed at 28 percent on the full-face value of bets placed or on the GGR and GST Council should now take a final call," sources privy to the report said.