GoM may lean toward point-of-entry taxation for casinos

A special group of ministers may be inclined to levy goods and services tax at casino entry points, according to two government officials.

The GoM, tasked with looking into the matter, is awaiting a legal opinion on some of the concerns raised by industry bodies, the officials said on condition of anonymity as details are not yet public. It is likely to refrain from using gross gaming revenue as an assessment mechanism to collect GST, they said.

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

The number of transactions will increase once they are entered, and the amounts will vary depending on the wins and losses of previous games, the official said, making it difficult to track each transaction.

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

The first, Gandhi told BQ Prime, is when chips are purchased, and GST could be charged for the full value or for the value of all chips purchased. This would also include chips which could be used to buy food and drink.

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

The GoM initially decided to levy a port of entry tax ahead of the GST Board meeting in Chandigarh on June 28-29 this year. After the meeting, Union Finance Minister Nirmala Sitharaman said that Mauvin Godinho, Minister of Transport and Panchayat of Goa and one of the GoM members, expressed the wish to review the levy mechanism as the total value of the consideration would include food and beverages.

This prompted a GST review on all three online games, horse racing and casinos. The July 15 deadline was extended and three GoM members—Meghalaya Chief Minister Conrad Sangma; UP Minister Suresh Kumar Khanna; and Godinho – met with online gaming representatives, the turf association and representatives from Bangalore and Goa casinos in late July.

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

However, at the meeting in early September, opinions on the tax assessment method diverged again with the possibility of a differential tax rate for the three games. The final GoM review is still awaited.

Questions emailed by BQ Prime to ministers on the panel went unanswered.

“Taxation at the point of entry makes sense, but the bifurcation of tokens used for food and drink and the value of tokens used in games is something we are still waiting for,” Gandhi said.

For online games, the debate concerns the tax rate at 28%, not the levy mechanism. Although the GoM initially recommended against making a distinction between games of skill and chance, they sought a legal perspective.

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

As with horse racing, GST should be calculated on the total value of bets placed with bookmakers.

The final report was expected seven to 10 days after the Sept. 5 meeting, according to a PTI report. But it was delayed.

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