GST Council GoM to meet on May 2 and recommend taxes for casinos and online gambling

The Group of Ministers (GoM) set up by the Union Finance Ministry to consider issues related to the GST regime covering casinos, racetracks and online gambling will hold a crucial meeting on May 2 in Delhi.

Chief Minister of Meghalaya, Conrad Sangma, is the organizer of GoM. He replaced Gujarat’s finance minister, Nitin Patel, who was kicked out of Gujarat’s cabinet in a reshuffle in September last year. Other members of the group are Maharashtra Deputy Chief Minister Ajit Pawar, West Bengal Finance Minister Chandrima Bhattacharya, Gujarat Finance Minister Kanubhai Patel, Goa Panchayat Minister Raj Mauvin Godinho, Finance Minister of Tamil Nadu Palanivel Thiaga Ragan, the Minister of Finance of Uttar Pradesh Suresh Kumar Khanna and the Minister of Finance of Telangana, Thanneeru Harish Rao.

The committee is expected to deliberate on four issues related to casinos, racetracks and online gambling in India. The GoM’s mandate is to review the assessment of services provided by casinos, racetracks and online gaming sites, as well as the taxation of certain transactions in a casino.

READ | GST collection at record high of Rs 1.42 lakh crore in March

The group should consider existing legal provisions and court orders on related matters. Naturally, the GoM will also make recommendations on possible changes to existing laws to implement the new valuation methods that will come into play regarding casinos, racetracks and online gambling.

Ahead of the GoM meeting in the nation’s capital on May 2, Goa Minister Mauvin Godinho said the GST Council would take a final call on the group’s recommendations. He added that several representations to the Board proposing that the four categories be taxed according to gross gaming revenue will be considered by the group.

Online games involving betting are subject to a 28% GST rate, while games not involving betting or gambling fall within the 18% bracket.

The group, in its deliberations on May 2, will consider the administration of the valuation provision and whether an alternative valuation methodology could be recommended. It will also assess the impact on other similar services like the lottery.

Previously, the Lottery Group of Ministers, established in January 2019, recommended in its report that questions of rates and assessment of casinos, horse racing, online gambling and betting could be referred to the Fitment/ Law, then taken to the GST Board. He had proposed that this could be done either by addressing the matter directly or by letting a GoM approved by the Union Finance Minister settle the matter.

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The issue featured prominently at the 35th GST Council meeting on June 21 and the 37th Council meeting on September 20, 2019.

The agenda for the June 21 meeting was included to discuss representation to define value for tax purposes. The proposal involved a two-pronged discussion: the methodology and procedure for determining the face value and amount of the bet to determine the tax to be referred to the Laws Committee, and the issue of the level of tax to be referred to the Editing Committee.

At the September 2019 meeting, the Adjustment Committee considered a proposal to reduce betting in horse racing from 28% to 18%, as well as the exclusion of prize money from the assessed value of horse racing .

Meanwhile, another GoM set up for GST rate rationalization has yet to finalize a report that will go to the GST Board for its final nod.

Although the GST Board is the final arbiter on the crucial indirect tax regime, the call for the overhaul of tax levels and the reallocation of goods and services to new slabs is a political call to be taken by the Center and States.

There are two crucial constraints that compress the Center and the States. First, rising inflation due to soaring petrol and diesel prices: this can be combated by lowering taxes. Second, to secure higher revenues under the five-year compensation period for states that have suffered revenue losses since the GST regime came into force (July 2017), an upward streamlining of taxes is required.

As the five-year window closes in July this year, states have demanded an extension of the compensation tax because they have not yet achieved a state of tax neutrality since adopting the GST as a single tax for all India.

In November 2017, as part of a massive overhaul of the GST, the tax rates on more than 200 items, ranging from chewing gum and chocolates to beauty products, wigs and wristwatches, have been reduced to provide relief to consumers and businesses in an economic downturn. At the 23rd GST Council meeting in Guwahati. Led by then Finance Minister Arun Jaitley, up to 178 items of daily use were moved from the top tax bracket of 28% to 18%. The GST Board had reduced the list of items in the top 28% Goods and Services Tax (GST) band to just 50 from 228 at the time.

At that time, the pruning was expected to result in a reduction of Rs 20,000 crore in GST revenue collection.

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