GST Council meet: Tax on online gaming activities unlikely to be discussed

Council was to meet on Feb 18, but schedule may be changed

The Goods and Services Tax (GST) Council is unlikely to take up the group of ministers (GoM) report on taxing online gaming at its upcoming meeting as the matter requires extensive deliberations, a senior finance ministry official told Business Standard.

The Council, chaired by Union Finance Minister Nirmala Sitharaman, is scheduled to meet on February 18. However, there could be a change in the schedule as some states have requested this, the official said. According to official sources, the Council will take up another panel report on setting up an appellate tribunal for GST related disputes.

The group of ministers (GoM) led by Haryana Deputy Chief Minister Dushyant Chautala had submitted its report on setting up an appellate tribunal, proposing that each Bench comprise a president, two judicial members, one technical member (Centre), and another technical member (state). The GoM has also agreed with states on relaxing the experience criterion for appointment of technical members.

Besides, the Council may consider some duty revision on a few stationary items, including sharpeners.

At the previous meeting, which was held in December, the Council had deferred two key state panel reports on setting up the framework of the appellate tribunal and capacity-based taxation on pan masala and gutkha because of time constraints. The second report of the GoM on taxing online gaming was not included in the Council’s agenda as it was submitted just before that meeting. 

In the case of online gaming, the panel, headed by Meghalaya Chief Minister Conrad Sangma, could not arrive at a consensus on the valuation on which tax should apply.

No consensus

• GoM submits second report on taxation of online gaming activities in December
• State panel could not arrive at consensus over valuation
• Council likely to approve proposed framework for appellate tribunal
• Duty revision of some stationery items could be considered

Sources said that although the panel agreed to tax the supply of actionable claims at 28 per cent, it could not decide whether the levy should be on the net amount (after removing prize money) or gross gaming revenue (GGR).

GGR is the total amount collected by casinos and online gaming companies before paying out money to winners.

In its first report, the GoM recommended that online gaming activities should be taxed at a flat 28 per cent on the full value of consideration, without making any distinction between games of skill and games of chance.

Sources aware of the matter said there were diverse views among panel members. And, despite several rounds of deliberation, they could not arrive at consensus on the issue. The Council may wait for them to deliberate further on this.

The panel is learnt to have considered the implications of the earlier proposal of taxing on face value and gross revenue.

It was argued that the financial implications of subjecting GST on GGR were substantial. Taxation of online gaming or casinos at GGR creates a huge distortion in terms of tax differential between lottery (face value taxation) and these activities.

In the case of casinos, the EGoM had earlier recommended charging the highest GST rate of 28 per cent on the full face value of chips or coins purchased by a player. The chips may be used for buying items such as food and beverages as well. However, Goa objected to the proposal.