India’s GST Council needs help figuring out gambling taxes

India's GST Council needs help figuring out gambling taxes

India’s GST (Goods & Services Tax) Council essentially rewrote the tax code a few months ago without actually rewriting anything. It decided to re-interpret the current language and, as a result, casino operators were suddenly on the hook for hundreds of millions of dollars. The gambling industry has been trying to get the GST Council to lighten up, but nothing seems to be working. They want the applicable tax rates to be reduced, or for the GST to alter how it calculates taxes, but the council isn’t budging. It has now emerged that the Group of Ministers (GoM), though a panel it created earlier this year, is going to have to make the call because the GST Council can’t make a decision.

India's GST Council needs help figuring out gambling taxesThe issue is two-pronged – one involves how taxes on lotteries are collected and the other involves how gambling taxes are calculated. Sudhir Mungantiwar, the Maharashtra Finance Minister, created the GoM panel in order to review how to apply GST rates on the sale of lottery tickets. State lotteries pay a rate of 12%, but private distributors pay 28%. Some have called the dual rates unconstitutional, but the Calcutta High Court has already stated that existing laws allow the structure, adding, “It is within the domain of such Council to decide the rate of tax.”

The push by the gambling community for a single rate fell on deaf ears when the GST Council met last week, according to an article by the Goan Daily Herald. The majority of the members of the council, including Union Finance Minister Nirmala Sitharaman, voted against the demands of the operators.

There is also a huge argument against the GST Council’s current interpretation of the tax code. The council asserts that the taxes must be paid on the face value of the bet, which the entire casino industry has said isn’t feasible. It appears that the council wants to pass the buck and have the GoM make the call, instead. Pramod Sawant, the chief minister of Goa, stated, “There was some issue on GST on gross revenue, which has now been handed over to the Group of Ministers for further discussion. It is for the GST council to decide.”

In the meantime, the casinos are still without proper guidance and India can’t get a better handle on its gambling-related finances. There is no word on when the GoM might making a ruling, or if it will send the issue back to the GST Council.