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Business News/ News / India/  GST Council decides on 28% tax on online gaming, horse racing, casinos; exempts tax on certain imported drugs
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GST Council decides on 28% tax on online gaming, horse racing, casinos; exempts tax on certain imported drugs

Sitharaman said that tax rates were brought down on four items--uncooked snack pellets, fish soluble paste, certain yarn and LD slag--a byproduct of steel production that is used in certain industries

The Council decided to streamline the definition of sports utility vehicles, which attract 22% cess in addition to a 28% GST rate. (istock)Premium
The Council decided to streamline the definition of sports utility vehicles, which attract 22% cess in addition to a 28% GST rate. (istock)

New Delhi: Federal indirect tax body the Goods and Services Tax (GST) Council on Tuesday exempted integrated GST (IGST) levied on select drugs when imported for personal use, redefined sports utility vehicles to prevent car makers side stepping the highest tax bracket and decided on levying 28% uniform GST on online gaming, horse racing and casinos on the full-face value of bets.

Finance minister Nirmala Sitharaman who also chairs the GST Council said at a briefing that tax rates were brought down on four items--uncooked snack pellets, fish soluble paste, certain yarn and LD slag--a byproduct of steel production that is used in certain industries.  The Council also exempted IGST in the case of three items--cancer drug Dinutuximab (Quarziba) and medicines and food for special purposes used in the treatment of rare diseases spelt out by the health ministry.

As per the tax rate changes, uncooked snack pellets and fish soluble paste will now be taxed at 5%, down from 18%, while a specific type of yarn will be taxed at 5% down from 12%. Tax rate on LD slag will be brought down from 18% to 5% to be at par with blast furnace slag and fly ash.

In the case of taxation of online gaiming, horse racing and casinos, a vexed issue on which ministers did extensive consultation, the Council recommended amendments to the law to specify 28% tax on all three on their full face value.

"Today I am happy to say we have arrived at a decision. There will be some amendments to GST law.. Simply put, online gaming, horse racing and casinos will be taxed at 28% and will be taxed on full face value," Sitharaman said.

Amendments to GST law will be brought to specify that Tax will be applicable on  the face value of the chips purchased in the case of casinos, on the full value of the bets placed with bookmaker/totalisator in the case of horse racing and on the full value of the bets placed in case of the online gaming, an official statement from finance ministry explained.

However, industry players expressed their concerns. Malay Kumar Shukla, Secretary of E-Gaming Federation called the move "an extremely unfortunate decision as charging a 28% tax on full face value will lead to a nearly 1000% increase in taxation and prove catastrophic for the industry."

"A tax burden where taxes exceed revenues will not only make the online gaming industry unviable but also boost black-market operators at the expense of legitimate tax-paying players, further undermining the industry's image and capacity to survive," Shukla said in a statement after the Council meeting.

The Council decided to streamline the definition of sports utility vehicles, which attract 22% cess in addition to a 28% GST rate. The existing definition covers vehicles popularly known as 'sports utility vehicles' in addition to having engine length more than  4000 mm, engine capacity more than 1500 cc and having ground clearance of 170 mm  and above. From this, the reference to SUV is being dropped. It will also be clarified that ground clearance will be measured in un-laden condition.

Large multi-utility vehicles like the Toyota Innova Crysta and Hycross, as well as the Maruti Suzuki Invicto will attract compensation cess of 22%, as per the Council's clarification as a vehicle no longer has to be "popularly known as an SUV" to attract 22% cess as long as it meets a set of criteria related to height, ground clearance and engine capacity.

Now, MUVs meeting the above criteria will be taxed at par with full-sized SUVs such as the XUV700 and Scorpio-N, attracting 28% GST and 22% compensation cess.

MUVs such as Maruti Suzuki Ertiga, XL6 and Kia Carens have engine capacities less than 1500cc, and will therefore continue to attract 17% cess. However, sources in the industry highlight that the the implications of the GST Council's specification of "unladen" ground clearance will need more clarity, as vehicle ground clearance is typically certified in a laden state.

The Council also decided to introduce provisions in central and state GST rules to allow states to require e-way bills or electronic permits for transportation of gold within their territory.

The Council also decided to mandate producers of tobacco, pan masala and other similar items to register their machines and for filing special monthly returns. Penalty will be levied for non-registration of machines by such manufacturers, said the statement.

Revenue secretary Sanjay Malhotra, who was present on the occasion explained that there was a doubt around the tax rate applicable on food and beverages when consumed in cinema halls.

The Council clarified that these will be taxed at 5% and not at 18% when sold independent of the cinema ticket and not as a composite supply, the official said.

Malhotra also explained that Centre's order last week of allowing the Financial Intelligence Unit (FIU) to share information with GSTN, the company that processes tax returns was meant to empower the tax authorities with more information. "GSTN is the recipient of information," the official said.

The Council also decided to exempt private satellite launch services from GST to encourage start ups. 

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ABOUT THE AUTHOR
Gireesh Chandra Prasad
Gireesh has over 22 years of experience in business journalism covering diverse aspects of the economy, including finance, taxation, energy, aviation, corporate and bankruptcy laws, accounting and auditing.
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Published: 12 Jul 2023, 12:50 AM IST
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