The GST Council, a constitutional body in India responsible for making decisions regarding GST rates and policies, announced during its 50th meeting held on July 11, 2023, that specific forms of entertainment, namely online gaming, horse racing, and casinos, will now be subject to GST at a rate of 28%. The GST rate of 28% applies to the entire face value of these activities, meaning that the tax will be levied on the full value without any deductions or exemptions. This decision aims to streamline the taxation process and ensure uniformity in the tax treatment of these entertainment sectors.
In an effort to incorporate online gaming and horse racing into the scope of taxable actionable claims, the government plans to introduce a bill during the upcoming Monsoon Session of Parliament. This bill will propose an amendment to Section 3 of the GST Act, enabling the inclusion of online gaming and horse racing as taxable activities.
"Online gaming, horse racing and casinos will be taxed at 28% (all three activities) and they will be taxed on full face value," said Sitharaman at a press conference in New Delhi.
5% GST on F&D in Cinema Halls
The GST Council implemented two notable revisions. Firstly, it decreased the service tax rate for food and beverages served in cinema halls to 5%, bringing it in line with the rate imposed on restaurants. Previously, cinema halls were subject to an 18% GST rate, but this has now been reduced to 5%.
Revised SUV Defination
Additionally, the council modified the definition of an SUV, stipulating that it would attract a cess in addition to the prevailing GST rate. This implies that SUVs will now be subject to an extra levy on top of the standard GST rate, resulting in an increased overall tax burden for these vehicles.
According to Sitharaman, the current definition for an SUV subject to a cess has four parameters: popularly known as an SUV, length of 4 meters or above, engine capacity of 1,500 cc and above, and unladed ground clearance of at least 170 mm. The revised definition will only consider length (4 meters and above), engine capacity (1,500 cc and higher), and ground clearance (unladed clearance of 170 mm and above).
Despite the disappointment expressed by the industry, Finance Minister Sitharaman clarified that the intention behind the decision was not to undermine or harm the industry. She emphasized that it was a matter of ethical consideration, stating that the industry should not receive more encouragement than essential goods.
“We are disappointed that the GST Council and authorities have chosen to apply 28% GST on the total entry amount including prize money. This decision will have a chilling effect on the $ 2.5-billion FDI already invested by investors and jeopardise potentially any further FDI in the sector. Further, this decision will shift users to illegal betting platforms leading to user risk and loss of revenue for the government," said Joy Bhattacharjya, Director-General, Federation of India Fantasy Sports.
Abhishek Jain, National Head & Partner, Indirect taxes, KPMG also noted that while the detailed amendment would need to be evaluated, the move for levying 28% GST on full value is much against the industry expectations. "This recent growing sector was expecting relief with clarification on GST only being applicable on the platform fee earned by them," he said.
Source: Business Today