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GoM May Lean Towards Levying GST At Entry Points For Casinos

From the view of taxation, it would be difficult to keep track of transactions and levy tax after the entry point.

<div class="paragraphs"><p>Image for representational purposes. (Photo: Unsplash)</p></div>
Image for representational purposes. (Photo: Unsplash)

A special group of ministers may lean towards taxing goods and services tax at entry points for casinos, according to two government officials.

The GoM, tasked with reviewing the matter, awaits legal opinion on some of the concerns raised by industry bodies, the officials said on the condition of anonymity as details are not public yet. It is likely to refrain from using gross gaming revenue as the valuation mechanism for levying GST, they said.

From the point of view of taxation, the second person, a senior official in the revenue department, said it would become difficult to keep track of transactions and levy tax after the entry point.

The number of transactions will increase once they enter, and the amounts will vary according to the winnings and losses from the previous games, the official said, making it difficult to keep track of every transaction.

According to Hardik Gandhi, partner at Deloitte Haskins & Sells, collecting GST at the entry point is much more efficient and better.

The first, Gandhi told BQ Prime, is when the chips are bought, and GST could be charged at full consideration value or for the value of all the chips purchased. This would also include chips that could be used for buying food and beverages.

The second event is when the chips are used at the pool table and the players actually receive the service at this point, Gandhi said. GST could be levied on the revenue generated after the prize pool is deducted, commonly known as the gross gaming revenue, he said. GGR is the wagered amount minus the amount that was won.

The GoM had initially decided on levying tax at the entry point prior to the GST Council meeting in Chandigarh on June 28-29, this year. After the meeting, Union Finance Minister Nirmala Sitharaman said Mauvin Godinho, Goa minister for transport and panchayat and one of the GoM members, had expressed the to review the levy mechanism as the full consideration value would be inclusive of food and beverage.

That prompted a review of GST on all three—online gaming, horse racing, and casions. The deadline of July 15 was extended and three members of the GoM—Meghalaya Chief Minister Conrad Sangma; UP minister Suresh Kumar Khanna; and Godinho—met with online gaming representatives, the turf association, and the casino representatives in Bengaluru and Goa in late July.

But the report was further delayed to August as legal reviews were sought on some of the issues raised by the industry bodies.

However, in the early September meeting, views on the tax valuation method further diverged with the possibility of a differential rate of tax for the three games. The final review from the GoM is still awaited.

Queries emailed by BQ Prime to the ministers on the panel remained unanswered.

"Taxing at entry point makes sense, but the bifurcation of chips used for food and beverages and the value of chips used in gaming is something we are still waiting for," Gandhi said.

For online gaming, the debate is on the rate of taxation at 28%, not the mechanism of levy. Though the GoM had initially recommended not to differentiate between the games of skill and chance, it has sought a legal view.

The industry is also hoping that GST will only be charged on the platform fee and not the total bet value, Gandhi said.

As for horse racing, the GST is expected to be calculated on the full value of bets placed with the bookmakers.

The final report was expected in seven to 10 days after the meeting on Sept. 5, according to a PTI report. But that has been delayed.