NEW DELHI: The Goods and Services Tax (GST) Council has decided to address the long-pending issue of valuation of taxable services provided by online gaming companies and casinos. To look into the matter, the Council has formed a Group of Ministers (GoM) comprising state finance ministers who represent their respective states in the GST Council.
The issue with taxability of services provided by the gaming platforms and casinos is whether tax should be levied on the total betting amount or just the fee retained by these platforms. Several petitions have been filed in the court against online fantasy games alleging that these platforms are paying taxes only on the amount of fee and not the total amount of money that is being put on stake.
The GoM will look into the issue and examine whether there is a need for change in legal provisions for better means of valuation of these services.
Tax experts and industry players say that the valuation of taxable services provided by online gaming companies and casinos is a big area of concern for the entire industry, and the government needs to bring more clarity on the issue.
"Clear guidelines on the aspects of taxing gross Pay-in/ Pay-outs amounts, referrals, bonuses, loyalty points, and forfeiture, etc need to be laid out in clear and relevant terms," said Rajat Mohan, senior partner in New Delhi-based CA firm AMRG & Associates.
He added that GoM needs to work on a litigation-free business landscape for all the entertainment companies including Casino, racecourse and gaming firms.
The Bombay High Court in an order in 2019 had held that money pooled in by players after deduction of platform fee is kept in an escrow account and that the amount pooled in the escrow account was clearly exempt from levy of any GST.
A special leave petition was filed in Supreme Court against the high court order, which was dismissed by the SC. However, it has said in its order that "it is open for the government to apply for a review in so far as the GST aspect is concerned before the High Court of Bombay".
The GoM will also examine if any changes in legal provisions would have any impact on the valuation of services like the lottery. The group will submit its recommendations within six months for consideration by the GST Council.
The GoM will be convened by Gujarat Deputy Chief Minister and Finance Minister Nitin Patel. The other member of the GoM would be Ajit Pawar, deputy CM of Maharashtra, Amit Mitra, finance minister of West Bengal, P Thiagarajan, finance minister of Tamil Nadu, B Bommai, home minister of Karnataka and Chowna Mein, finance minister of Arunachal Pradesh.