GST Council Sets to Tackle Ambiguous Taxability Issues of Casino and Online Gaming Platforms

Navigating the complex and dynamic Indian legal, taxation and court practice landscape concerning activities like betting, gambling and lottery requires the help and expertise of top specialists. The government is taking steps to assess the situation in view of recommending regulatory changes.

Betting and Gambling Valuation Issues are Addressed

India’s Goods and Services Tax (GST) Council has formed up a Panel of State Ministers tasked to examine valuation and taxability of services provided by casinos, gaming websites and race courses under active legislation and existing court orders.

The seven-member panel will also examine the administration of the regulatory framework concerning the valuation of these services and will advise whether changes to the legal provisions and the methods of valuation are recommended.

The Group of Ministers (GoM) is led by Nitin Patel – Deputy Chief Minister of Gujarat. Tamil Nadu and West Bengal Ministers of Finance Palanivel Thiagarajan and Amit Mitra, Maharashtra and Arunachal Deputy Chief Ministers Ajit Pawar and Chowna Mein, the Transport Minister of Goa Mauvin Godinho, and the Karnataka Home Minister Basavaraj Bommai complete the list.

The Panel is to report its findings within a term of six months to the GST council which consists of the state Ministers of Finance and is chaired by the Centre’s Finance Minister.

Services, Goods, or Actionable Claims?

The Goods and Services Tax was introduced in July 2017 to substitute all previous state indirect taxes such as services tax, entertainment tax and others. Gambling and betting were placed under the highest category together with luxury items and services to be charged with 28 per cent.

In January 2018, it was further clarified that the 28 per cent tax is applicable to the total value of bets on all betting and totalisator services at racecourses or such provided by licensed bookmakers.

Another circular from the same month defined the highest GST rate as applicable not just to casino entry fees, but to all betting and gambling services provided by casino establishment like 10Cric s at the full transaction value. This includes betting, as well as foods and drinks served at brick-and-mortar casinos.

Various court actions followed and brought significant decisions that influence the GST practice. Notable examples include the Gurdeep Singh Sachar vs Union of India and Ors case before the Bombay High Court. The ruling from 30 April 2019 qualified the total staked amount, or the acknowledgement amount, as an actionable claim. As such the transaction cannot be considered neither as supply of goods, nor provision of services under GST (Schedule III of the CGST Act). Thus, online fantasy sports operator Dream11 was found to be not violating any taxation regulations when charging 18 per cent GST on the platform fee only, leaving the staked amount not taxed.

However, the operation of the decision of the Bombay HC has been stayed by the Hon’ble Supreme Court vide it’s order dated 06.03.20.

The Supreme Court, in a verdict from December 2020, ruled that levying GST on lotteries, betting and gambling does not contradict the Constitution. The apex court dismissed the plea of the authorised Punjab state lottery agent Skill Lotto Solutions Pvt Ltd and held that Parliament had the right to impose the CGST Act the way it has. The bench ruled that the three categories of actionable claims included in the 2017 Act – lottery, betting and gambling – do not contradict the legal meaning of “goods”.

According to the top court, one or another form of taxation on betting, gambling and lottery activities has existed for decades and it cannot be argued that the imposition of taxes on these actionable claims by Parliament, while leaving others untaxed, had no rationale or reason behind it.

New Strategic Alliance Forged to Help Users Navigate Legal Ambiguity

ENV Media has joined forces with leading Indian law firm Touchstone Partners in their continuous effort to analyse and review the legal implications of online gambling on behalf of desi users.

Bharat legal and taxation framework is complex and dynamic and the two companies will work together in the building up of a database of accurate and factual information that will make it easier for everyone to find the answers to their questions, says Felicia Wijkander, Editor in Chief of ENV Media’s SevenJackpots.

The legal advisors will review, audit and amend if necessary the sites’ research papers and articles on national and state gambling legislation and tax regulation. Audited items will bear the Touchstone Partners stamp ensuring users that information has been double checked by renowned specialists.

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