GST Council may treat fantasy games on a par with gambling, taxed at 28%

GST Council is likely to consider system-led enforcement reforms

The Goods and Services Tax (GST) Council in its two-day meeting is likely to consider a proposal for imposing a flat 28 per cent tax on online skill gaming, bringing it on a par with betting and gambling. It had been argued that online skill gaming and gambling should not be distinguished “merely on the ground that an activity is a game of skill or chance or both”.

The Council, which will meet on June 28 and June 29 in Chandigarh, may also consider bringing stringent enforcement measures under the GST regime to plug revenue leakage.

These matters on the Council’s agenda are in line with the recommendations of two groups of ministers (GoMs), which are expected to table their respective reports at the Council’s meeting, said two people aware of the action-packed agenda.

The GoM headed by Conrad Sangma, chief minister of Meghalaya, was tasked with examining the taxation of fantasy sports and casinos. A separate ministerial panel, headed by Maharashtra Deputy Chief Minister Ajit Pawar, was asked to suggest reforms in the GST system to combat tax evasion.

These reports assume significance because if they get the Council’s nod, they shall help boost the revenue collection, given that the compensation regime for states for revenue shortfall is to end this month. The Council, it has been learnt, is also likely to review the framework for setting up a GST tribunal for resolving litigation.

What GoMs have proposed

• GST rates for online gaming, casino should be uniform at 28%
• No tax on each betting transaction in casino
• Horse racing should continue to attract 28% GST on full bet value
• Games of skill should not be treated differently from games of chance
• Integration of GST data with NPCI
• Biometric verification of premises of high-risk businesses 
• Tightening of restrictions process to identify fake invoices

Online gaming

The ministerial panel’s report on online gaming suggested that the imposition of GST on casinos, race courses, online gaming, and lottery should be “uniform” (in terms of both rates and valuation). And that the tax rate for all these activities should be 28 per cent, it said.

Currently, most online gaming platforms pay 18 per cent tax on the commission collected for each game. Those involved in betting or gambling attract 28 per cent GST. For horse racing, GST is levied at 28 per cent on the total bet value.

“The online gaming sector is growing at a fast pace and has high revenue potential. Considering its huge market share and prominent revenue projections, it has larger financial implications,” the report highlighted.

The report said that for the purpose of GST imposition, no distinction should be made between these activities merely on the ground that an activity is a game of skill or chance or both.

The panel of ministers also suggested that in the case of online gaming, tax should be levied on the “full value” of consideration, including the contest entry fee, paid by the player for participation in such games.

With respect to the race course, the panel is of the view that 28 per cent GST should be levied on the full bet value, whereas in the case of casinos, on the value of chips/coins purchased from the casino by the player.

“Once GST is levied on the purchase of chips/coins, no further GST to apply on value of bets placed in each round of betting, including those played winnings of previous rounds,” the report clarified.

It further said that the entry fee to casinos, including the price of other supplies, such as food and beverages, should be taxed at 28 per cent. Any other additional service/optional supplies made independent of the entry ticket shall be taxed at the rates as applicable on such supplies, it noted.

GST system reforms to curb evasion

The Ajit Pawar panel has proposed a slew of measures, including integrating GST data with the National Payment Corporation of India (NPCI), to ensure that all bank accounts linked to a permanent account number (PAN) are made available to officers. This shall help alert tax authorities in case of any discrepancy.

The proposed measures include biometric and physical verification of premises of high-risk businesses flagged by the system as a prerequisite for registration and inclusion of electricity bills during the registration of new taxpayers.

The panel also recommended artificial intelligence-based interdiction to generate reports that shall enable officers to make post-registration verification and take other necessary actions for high-risk taxpayers.

Further, the report recommends the use of geocoding and physical verification to ensure that high-risk taxpayers file the correct address during registration.