The GST Council’s 50th meeting conducted on the 11th of July 2023, was chaired by our Hon’ble Union Finance and Corporate Affairs Minister Ms. Nirmala Sitharaman passed a crucial decision for the online gaming industry as well as horse racing businesses. With the help of the Group of Ministers, the GST Council made recommendations on the imposition of a uniform tax rate of 28% on all online gaming, casino, and horse racing businesses. In order to give effect to this recommendation suitable amendments will be made to the law including online gaming and horse racing in Schedule III as actionable claims. The recommendations clarify that a 28% tax rate will be applicable to the face value of the chips purchased in case of casinos, on the full-face value of the bet placed with bookmarker in the case of horse racing, and on the Gross Gaming Revenue (GGR) or on the full value of the bets placed in case of the online gaming.

Presently, the GST tax regime differentiates online gaming into a game of skill and a game of chance. A game of skill is where the outcome depends on the expertise, practice, and experience of the player whereas a game of chance is based on the probability of things. This distinction is important because a game of skills essentially attracts a lower tax rate. By recommending a uniform tax the council has officially ended the long- standing debate on “a game of skill or chance”.

The intention of the council in doing so was to simplify the tax regime and not end any industry and at the same time to keep a moral view towards the gambling industry as a whole. In the council meeting, Sitaraman stated that “It is impossible to pierce that veil which brings opacity on how it is actually operated”, she further explained that the GST Council’s decision focused on the taxation part of online gaming and it will align with the regulation of the Ministry of Electronics and Information Technology (MeitY). The tax on online gaming companies would be imposed without making any differentiation based on whether the games required skill or were based on chance, and that there will be an amendment in the GST law to tweak the definition of actionable claim.

Among other things, the council also exempted GST on the importation of cancer medicines and other drugs used for the treatment of rare diseases, and food used for special medical purposes. The committee also clarified that utility vehicles, by whatever name called would attract a 22 percent cess over and above the GST rate which will be assessed on three key parameters, that is, length greater than 4 meters, engine capacity greater than 1500 cc, and on the ground clearance in ‘unladen condition’ more than 170 mm. Here the council aims to give clarification that any vehicle should only be assessed on the abovementioned parameters and not by their model names like SUV, MUV or LMV, etc.

Lastly, the F&B industry also received significant tax amendments. The council declared rates on uncooked/unfried snack pellets, by whatever name called, to be 5% and also recommended regularizing payment of GST on uncooked /unfried snack pellets during the past period on an “as is basis”. Along similar lines, the council also decided to clarify that the supply of food and beverages in cinema halls are to be taxed at a 5% rate and not at a rate of 18%, as restaurant service as long as (a) they are supplied by way of or as part of a service and (b) supplied independently of the cinema exhibition service. Where the sale of cinema tickets and supply of food and beverages are clubbed together, and such bundled supply satisfies the test of composite supply, the entire supply will attract GST at the rate applicable to the service of an exhibition of cinema, the principal supply. This new cut-down on F&B taxes will eventually increase the audience’s access to theatres by reducing the expense. In the long run, it will only improve the movie-going experience and give a healthier outlook to the cinema sector from a consumer’s perspective.

Author – Gunjan Arora (Senor Associate)

Co- Author – Shourya Singh (Intern)