The 50th GST meeting, chaired by Union Finance Minister Nirmala Sitharaman, is scheduled to take place on July 11, 2023, at Vigyan Bhawan in New Delhi. During this meeting, the council will address the taxability issue of online gaming and aim to find a resolution, as per reports.
Background
The matter of taxing online gaming firms has been pending for some time. Previously, the GST Council had formed a committee of state ministers led by Meghalaya Chief Minister Conrad Sangma to examine the issue. However, the committee was unable to reach a consensus and submitted its report in December. The committee had initially proposed a 28% tax rate on the total value, including winnings. Since no agreement was reached, the matter was referred back to the GST Council.
States’ Perspective
Some states have expressed their disagreement with treating online gaming on par with betting and gambling. They argue that tax rates should not be excessively high as it would discourage technology-driven games.
Proposed Tax Structure
According to sources, the state panel has agreed to impose a 28% tax on the supply of actionable claims. However, there is uncertainty regarding whether the tax should be based on the net amount (after deducting prize money) or the gross gaming revenue (GGR).
Gross gaming revenue (GGR) refers to the total amount collected by casinos and online gaming companies before distributing winnings to players. The panel has discussed various proposals, including taxing based on the face value and gross revenue. However, concerns have been raised about the financial implications of taxing GGR, as it would create a significant disparity in tax treatment compared to lotteries, which are taxed based on face value.
Empowered Group of Ministers’ Recommendation
Concerning casinos, an empowered group of ministers had previously recommended applying the highest GST rate of 28% on the full face value of chips or coins purchased by players. These chips can also be used to purchase items like food and beverages. However, Goa objected to this proposal.
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