• Notification Date: 14-07-2023
• Notification No: N/A

GST Council to consider Legal Opinion on Taxing Online Gaming

Legal opinion has been sought on the levy of goods and services tax on online gaming, which is likely to be taken up by the GST (goods and services tax) Council in its meeting on July 11. 

The GST Council, chaired by Union Finance Minister Nirmala Sitharaman, is expected to discuss the report of the Group of Ministers on online gaming, horse racing and casinos. Sources indicated that with no consensus amongst the GoM, a long discussion may take place to reach some finality on the issue. 

The GST Council has also sought legal opinion on levying GST on online gaming and this would also be put forth at the meeting. “There are various aspects relating to the levy of GST on online gaming on the fees or the entire consideration. Further issues such as differentiation between game of skill or game of chance also need to be reviewed,” said a person familiar with the development. 

The GoM chaired by Meghalaya Chief Minister Conrad Sangma had in its report proposed a 28% GST on online gaming, but it failed to reach a consensus on whether the tax should be levied only on the fees charged by the portal or the entire bet amount. A second round of review last year also failed to reach any agreement. 

“The gaming industry also anticipates discussions on the report submitted by the GoM on the taxation of online gaming… Given the evolving regulatory and legal landscape surrounding online gaming, the Council is expected to review the taxability of online gaming,” said Charanya Lakshmikumaran, Partner, Lakshmikumaran & Sridharan Attorneys. 

Saket Patawari, Executive Director, Indirect Tax, Nexdigm however, cautioned that the Council could take more time to take a final decision on this matter considering the divergent views and lack of consensus among the GoM, the ongoing discussions with MEITY, as well as the recent decision of Karnataka High Court in Gameskraft Technology, which quashed a Rs 21,000 crore demand raised by the Directorate General of GST Intelligence. 

The 50th meeting of the GST Council is also expected to take forward the process of setting up the GST Appellate Tribunal, which has been a pressing need of the industry. The tribunals, a decision of which was taken in the last meeting, are likely to be set up by the year end. Relevant amendments have already been made through the Finance Act, 2023. 

“The formation of the GST Appellate Tribunal is a much-awaited issue, which will streamline GST jurisprudence and helps taxpayers to address their grievances of GST litigations. GST Council should frame rules in this regard and fix definite timeline for formation of GSTAT,” said Bimal Jain, Chair of Indirect tax committee, PHDCCI. 

Tax rates of a few items including millets as well as a cancer medicine are likely to be lowered. A clarification on the applicability of GST compensation cess on multi utility vehicles is expected as well as another clarification on the GST rate on food and beverages sold at multiplexes. However, a decision on lowering the GST rate on cement, which was sought by the industry, is unlikely to be taken. 

The recent drive against fake GST registrations as well as measures to expand GST revenues will also be reviewed, sources said. 

The Council is also likely to take up a few procedural issues. These include the two-factor authentication for e-way bill and e-invoice generation as well as the automation of scrutiny processes.