28% GST on online gaming, casinos; 5% GST on F&B at cinema halls; any UV to attract 22% compensation cess: FM

At the 50th Goods and Services Tax (GST) Council meeting on Tuesday, it was decided to levy 28% GST on full face value on online gaming, horse racing, casinos, announced Union Finance Minister Nirmala Sitharaman. 

"Online gaming, horse racing and casinos will be taxed at 28% (all three activities) and they will be taxed on full face value," said Sitharaman at a press conference in New Delhi.

"Suitable amendments to be made to law to include online gaming and horse racing in schedule III as taxable actionable claims. Tax will be applicable on  the face value of the chips purchased in the case of casinos, on the full value of the bets placed with bookmaker/totalisator in the case of horse racing and on the full value of the bets placed in case of the Online Gaming," said GST Council in a press release.

To concerns of the gaming industry that tax on entire value would kill the industry, she said, ''we are not killing any industry'' but gaming and gambling cannot be given a treatment lesser than essential industry.

''So the moral question was also discussed (at the Council meeting on Wednesday). It does not mean they be promoted more than essential industries,'' she said.

The panel also lowered the service tax levied on food and beverages consumed in cinema halls to 5% and tweaked the definition of an SUV for attracting a cess over and above the GST rate.

Sitharaman said presently the definition of an SUV for levy of cess includes four parameters -- should be popularly known as SUV, should be of length of 4 meters or above and engine capacity of 1,500 cc and above, and unladed ground clearance of minimum 170 mm.

Now, the SUV definition will include only the length (4 meters and above), engine capacity (1,500 cc and more), and ground clearance (unladed clearance of 170 mm and more), she said.

On the tax levied on food and beverages served in cinema halls, the GST Council decided to levy 5% GST, equivalent to the tax on restaurants, and not 18% as is applicable on cinema halls.

The report of the panel of eight state finance ministers, convened by Meghalaya Chief Minister Conrad Sangma, on taxation of online gaming, horse racing was discussed at the meeting.

The GoM (group of ministers) had a broad agreement that a 28% GST should be levied on all the three supplies, but a consensus eluded on taxability of online games with Goa suggesting that an 18% tax should be levied only on platform fees and contribution to prize pool should be tax exempt.

GST Council has exempted cancer-related drugs, medicines for rare diseases and food products for special medical purposes from GST, said Sitharaman.

The GST Council is chaired by the Union Finance Minister and comprises ministers from every state and Union Territory.

Sudhir Mungantiwar, Maharashtra forest, cultural and fisheries minister, said, earlier on Tuesday, that the Council has decided to do away with the distinction of game of skill and chance in case of online gaming. 28% tax would be levied on the full face value of bets, Mungantiwar said.

Ankur Gupta, Practice Leader (Indirect Tax), SW India said, "Ignoring the long-time demand of the gaming industry, levying a 28% tax rate on the gaming industry will be a big setback for the Indian players. We will need to see the fine print of notification if any exceptions are created. We might immediately see notices being issued to the gaming players for differential tax and with this new series of litigation.

"With the advent of technology and the use of handheld devices, the online gaming market is fast growing at $3 billion with more than 400 million users and is expected to grow rapidly in the next half a decade. Therefore, it was important to put taxability at par with global tax rates so that the Indian industry remains competitive.

"In most countries the online gaming industry is taxable more or less at par with the current taxability of 18%, therefore, it's a disadvantage for Indian game companies if the taxability moves to 28%. Even on the valuation, the taxability seems to be on the face value and not on margin / platform fee. Taxing the entire pool value will adversely impact the customers as well as they would get less playable value," said Gupta.

Other decisions taken on Tuesday:

* Rates brought down from 18 to 5% on uncooked and unfried snacks 

* Rates brought down on fish soluble paste from 18% to 5% 

* Rates on imitation zari threads brought down to 5% from 12%

* Exemption on GST for satellite launch services provided by private organisations

* LD slag to be at par with blast furnace slag