Money from horse race betting, lottery spending, and gaming has been important to state reserves in India over the last decade. Their contribution has led to other costs, such as fuel prices, being kept at a reasonable level.
These important sources are joined by casino gaming in states where the industry is licensed, such as Goa and Sikkim. You can read more about this industry here. If the legal situation concerning casino gaming continues to evolve in the country, it’s likely that revenue will significantly increase. However, there is a threat to revenue from licensed betting and gaming.
This threat is the imposition of GST of 28% on the activities.
The imposition of this taxation has led to a decrease in turnover in legal activities such as horse race betting and an increase in unregulated and illegal betting and gaming.
Deliberations agreed on 24 May 2021
As a result of the issues created by the high level of GST on betting, lottery, and casino gaming, on 24 May, the Indian Ministry of Finance agreed to deliberate the situation. Senior ministers from Gujarat, Maharashtra, Arunachal Pradesh, Goa, Karnataka, Tamil Nadu and West Bengal were to take part in the deliberation.
Their task was to consider:
- The valuation of the services of racecourses, online gaming providers, and casinos.
- Determining if there is a better method of evaluation.
- Deciding how any valuation provision would be administered.
What is the outcome likely to be and what are the potential effects?
It is highly probable that the high rate of GST, 28%, will be retained for gaming, casinos, lottery, and horse race betting. In fact, the taxation rate is unlikely to be part of the discussion.
The panel is likely to decide if:
- GST could be calculated based on gross gaming revenue rather than gross collections or face value.
- When cash payouts exceed gross collection in a certain tax period, they can be carried forward to offset gross collections for the following tax period.
- Tax should be imposed only on the price charged for the service.
- Tax should be calculated on a retention basis per tax period rather than on each gaming transaction.
These changes could help to increase interaction with regulated services and reduce the amount of illegal betting and gaming activity in the country. This in turn could actually increase the amount of revenue states obtain from legal gaming and betting activities within their jurisdiction.
It remains to be seen what the group’s findings will be. It seems likely that some changes will happen given the issues that have arisen from the current situation. However, bringing about any changes may be complex and new administration processes may be necessary.
Therefore, it’s likely to be some time into the future before we know for sure whether the deliberations will bring changes to lottery, horse race betting and casino gaming taxation.