The Group of Ministers (GoM) set up by the Union Ministry of Finance to look into matters related to GST regime covering casinos, race courses and online gaming will hold a crucial meet on May 2 in Delhi.
Meghalaya Chief Minister Conrad Sangma is the convenor of the GoM. He replaced Gujarat Finance Minister Nitin Patel, who was dropped from Gujarat’s council of ministers in a rejig in September last year. The other members of the group are Maharashtra Deputy Chief Minister Ajit Pawar, West Bengal Finance Minister Chandrima Bhattacharya, Gujarat Finance Minister Kanubhai Patel, Goa Minister for Panchayat Raj Mauvin Godinho, Tamil Nadu Finance Minister Palanivel Thiaga Ragan, Uttar Pradesh Finance Minister Suresh Kumar Khanna and Telangana Finance Minister Thanneeru Harish Rao.
The committee is expected to deliberate on four issues related to casinos, race courses and online gaming in India. The mandate of the GoM is to examine the valuation of services provided by casinos, race courses and online gaming websites, along with taxability of certain transactions in a casino.
The group has to take into account the existing legal provisions and court orders on related matters. Naturally, the GoM will also make recommendations on possible changes in existing laws to implement the new valuing methods which will come into play regarding casinos, race courses and online gaming.
Ahead of the meeting of the GoM in the national capital on May 2, Goa minister Mauvin Godinho said the GST Council will take a final call on the recommendations of the group. He added that several representations to the Council proposing that the four categories should be taxed as per gross gaming revenue will be examined by the group.
Online games involving betting attract a 28 per cent GST rate while games not involving betting or gambling are in the 18 per cent bracket.
The group, in its deliberations on May 2, will examine the administration of valuation provision and if an alternative methodology of valuation could be recommended. It will also evaluate impact on other similar services like lottery.
Earlier, the Group of Ministers on lottery, set up way back in January 2019, in its report had recommended that the rate and valuation issues of casinos, horse racing, online gaming and betting may be referred to Fitment/Law Committee, and then taken to the GST Council. It had proposed this can be done by either taking up the issue directly or letting a GoM approved by the Union Finance Minister whet the issue.
The issue figured prominently in the 35th GST Council meeting on June 21 and the 37th Council meeting on September 20 in 2019.
The agenda for the June 21 meeting was included to discuss representation to define value for the purpose of taxation. The proposal involved a two-pronged discussion: for methodology and procedure for deciding face value and bet amount for determining tax to be referred to the Law Committee and the issue involving the tax level to be referred to Fitment Committee.
In the September 2019 meeting, the Fitment Committee considered a proposal for a reduction in wagering in horse racing from 28 per cent to 18 per cent, along with excluding prize money from the taxable value of horse racing.
Meanwhile, another GoM set up for rationalisation of GST rates is yet to finalise a report which will go to the GST Council for its final nod.
Though the GST Council is the final arbiter on crucial indirect tax regime, the call on revamping tax levels and reallocating commodities and services to new slabs is a political call to be taken by the Centre and states.
There are two crucial compulsions squeezing the Centre and states. First, rising inflation due to shooting petrol and diesel prices: this can be tackled by a reduction in taxes. Second, to ensure higher revenues as the five-year term of compensation for states incurring revenue losses since GST regime kicked in (July 2017), an upward rationalisation of taxes is necessary.
While the five-year window closes in July this year, states have been demanding an extension of the compensation cess as they are yet to reach the revenue neutral state since the adoption of GST as one tax for all India.
In November 2017, in a huge GST rejig , tax rates on over 200 items, ranging from chewing gum to chocolates, to beauty products, wigs and wrist watches, were cut to provide relief to consumers and businesses amid economic slowdown. In the 23rd GST Council meeting in Guwahati. headed by then finance minister Arun Jaitley, as many as 178 items of daily use were shifted from the top tax bracket of 28 per cent to 18 per cent. The GST Council had pruned the list of items in the top 28 per cent Goods and Services Tax (GST) slab to just 50 from 228 at that time.
At that time, it was expected that the pruning would lead to Rs 20,000 crore reduction in revenue collection under GST.