New Delhi: The Goods and Service Tax (GST) Council held its 50th meeting in New Delhi on Tuesday and made several changes to the tax regime. Online gaming, horse racing, and casinos will now be subject to a 28% tax on their full-face value. This decision eliminates the distinction between a “game of skill” and a “game of chance”. The previous meeting of the Group of Ministers (GOM) had agreed to proposed taxes for these activities, but there was no consensus on online gaming, as Goa had suggested a tax rate of only 18% on platform fees.
According to Parag Mehta, a Partner at N.A. Shah Associates, the 28% GST on online gaming, horse racing, and casinos will have a significant negative impact on the gaming industry. He believes that online gaming companies will be greatly affected by this tax, potentially leading to reduced profits or even losses.
This could make it challenging for these companies to develop new games and technologies, and it may also undermine market competitiveness. Gaming companies are expected to challenge these amendments to GST laws based on constitutional grounds. They may also seek interim relief from the courts when these amendments come into effect.
The GST Council has also announced that the food and beverage (F&B) items sold in cinema halls will now be subject to a 5% tax, compared to the previous rate of 18%. This means that items like popcorn and other snacks inside cinema halls, which are already expensive, will now be slightly cheaper. The council has clarified that when cinema tickets and food items are sold together, the entire supply should be treated as a composite supply and taxed according to the applicable rate of the principal supply, which in this case is the cinema ticket. This decision brings uniformity and clarity to the taxation of such supplies and addresses the concerns raised by various state governments.
Furthermore, there are other products that will see a reduction in GST. Uncooked food palette, fish, and soluble paste will now be taxed at 5%.
The Council has also exempted the tax on the import of cancer treatment drugs and Food for Special Medical Purposes (FSMP) used in the treatment of rare diseases. Currently, these drugs are subject to a 12% integrated GST.
However, the prices of large utility vehicles, including SUVs and MUVs, will increase. SUVs longer than 4 meters will now face an additional 2% tax, with the GST cess increasing from 20% to 22%. The Council has also defined utility vehicles and tightened registration norms. Additionally, the compensation cess for MUVs will increase from 20% to 22%. It’s worth noting that sedans will not be subject to increased taxes, as Punjab and Tamil Nadu opposed this decision.
