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TMI BlogMinutes of the 51st Meeting of GST Council held on 02nd August, 2023X X X X Extracts X X X X X X X X Extracts X X X X ..... CGST Act, 2017, IGST Act, 12017, CGST Rules, 2017 and issuance/amendment of notifications Pertaining to casino, online gaming and horse racing 17-23 3. Addendum to Agenda item 2: Revised Valuation Rules- Rule 31B and Rule 31C - 1.3 The Secretary to the GST Council, welcomed all the Hon'ble Members of the Council and participating officers to the 51st meeting of the GST Council. 1.4 The Secretary on behalf of the Council, welcomed Dr. Pramod Sawant, Hon'ble Chief Minister, Goa to his very first Council Meeting. The Secretary also welcomed Sh. Ajit Pawar, Hon'ble Deputy Chief Minister, Maharashtra and Sh. B. D. Kalla, Hon'ble Member from Rajasthan who were attending GST Council meeting after some time gap. 1.5 The Secretary appreciated the immense contribution made by Sh. Vivek Johri, ex-Chairman, CBIC to the Council who had superannuated on 31/07/2023. 1.6 The Secretary stated that the GST Council in its 50th meeting had made certain recommendations on taxation of casinos, race courses and online gaming and recommended levy of 28% G ST on the face val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x all dated 31.07.2023 and one (1) more Integrated Tax Notification No. 01/2023-Integrated Tax dated 31.07.2023 have been issued based on the recommendations of the Council made in 50th meeting. He requested the Council to ratify the notifications and circulars issued based on the recommendations by the GST Council and take note of the decisions of the GST Implementation Committee (GIC). Decision: The Council ratified the notifications and circulars issued based on the recommendations by the GST Council and took note of the decisions of GST Implementation Committee. 3. Agenda Item 2 :- Proposal for making amendments to the CGST Act, 2017, IGST Act, 2017, CGST Rules, 2017 and issuance/amendment of the Notifications pertaining to the Casino, Online gaming and Horse Racing 3.1 The Pr. Commissioner, GST Policy took up the next agenda regarding amendments in CGST Act, IGST Act, CGST Rules, and issuance of notifications pertaining to taxability of online gaming, casinos, etc. He made the detailed presentation (attached as Annexure-3) on the recommendations made by the Law Committee and the discussion made in the Officers' meeting on the said agenda. He stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r . The Pr. Commissioner, GST policy stated that the said proviso is proposed to be inserted to provide clarity to identify the supplier in case of specified actionable claims. 3.6 The Pr. Commissioner, GST Policy took up the amendment regarding the taxability of cross-border supplies of online money gaming by a supplier located outside India to a person in India . The proviso to Section 5 of IGST Act is proposed to be amended so that the integrated tax on goods, other than goods as may be notified by the Government on the recommendations of the Council, imported into India shall be levied and collected in accordance with the provisions of Section 3 of the Customs Tariff Act, 1975 on the value as determined under the said Act at the point when duties of customs are levied on the said goods under Section 12 of the Customs Act, 1962. 3.7 A new Section 14A is proposed to be inserted in IGST Act to provide for special provision for taxability of supply of online money gaming by a person located outside the taxable territory to a person in India, inter - alia to specify liability on the said supplier for payment of integrated tax on such supply. Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. He stated that in the agenda, which was circulated earlier, the words 'or payable' after the words 'total amount paid' are proposed to be inserted in Rule 31B and 31C of CGST Rules as per the discussion in Officers' meeting. 3.11 Pr. Commissioner, GST Policy stated that one of the concerns was that the money could directly be used in the slot machines instead of tokens or coins to address which it was proposed to add a sub-clause (ii) in Rule 31C in the definition to provide that value of supply shall be the total amount paid or payable by or on behalf of the player for participating in any event, including game, competition or any other activity or process, in the casino, in cases where the token, chips, coins or tickets, by whatever name called, are not required. 3.12 Further, he also stated that, it is proposed to add an Explanation to Rule 31B and Rule 31C to state that any amount received by the player by winning any event, including game, scheme, competition or any other activity or process, which is further used for playing by the said player in an event without withdrawing, shall not be considered as the amount paid or deposited with the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.16 The Principal Commissioner, GSTPW mentioned that in Officers' meeting, Kerala had suggested that in the case of online gaming, recording of PIN code of the recipient by the supplier should be made mandatory to record the place of supply. This issue was discussed and it was recommended that whether pin code or State code would be sufficient for the determination of Place of Supply is a broader issue related to online supplies of various goods and services. This aspect should be decided in the case of all the online supplies of goods and services and Law Committee should examine it and then bring it before the Council. He further stated that the suggestion of Haryana to include virtual digital assets in the definition of consideration in section 2 (31) of the CGST Act 2017 was also discussed and it was noted that this is also a larger issue and requires separate examination by the Law Committee. 3.17 The Pr . Commissioner, GST Policy then took up the suggestion put forth by Gujarat wherein it was suggested that amendment may be made in section 17(5) of CGST Act for blocking of the ITC on account of tax paid by business entities for their employees in relatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue. 3.22 The representative of Goa stated that casino industry is limited to only two States i.e Sikkim and Goa and this decision would adversely affec t the casino industry leading to its closure. Non-refund of tax on return of chips in casino sector will promote unethical practices in the casino industry and requested for re-consideration of this issue in GST Council meeting. 3.23 The Hon'ble Member from Kerala informed that he is in general agreement with the decision taken in 50th GST Council Meeting. However, he raised the issue of Place of Supply in case of online gaming and suggested that in case of online gaming, recording of PIN code of the recipient should be made mandatory. He therefore requested that specific provision for recording of PIN code be notified so that consuming State could get their due revenue. 3.24 The Secretary suggested that the issue of requirement of PIN code of the recipient and Place of Supply is a larger issue and not only related to online gaming but also to other online supplies as well. Therefore, it may be separately examined in detail by the Law Committee including all cases of online supply of goods and services. He a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clubbing online gaming with betting and gambling under GST Law would be contrary to the spirit of the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 and even imposition of same 28% tax rate on online gaming does not separate online gaming from betting and gamb l ing. Therefore, these should be kept in different categories. He requested that the recommendation of GST Council to levy tax on the full face value paid for casino, race course and online gaming should be examined in detail before taking final decision regarding the value of supply. 3.28 The Hon ' ble Member from Bihar supported the proposal to levy higher tax rate on gambling as it would not only increase the revenue of the Centre and States but it also has social and moral connotations. The Hon'ble Member further requested the Members of the Council to bring the proposed amendment bill to implement recommendation of GST Council on casino, race course and online gaming as soon as possible. The Hon'ble Member from Bihar thanked the Chairperson for inclusion of settlement amount of States in PIB releases. Further, the Hon ' ble Member from Bihar requeste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f they suffer fall in their revenue. He reiterated to stick to the decision of the GST Council and implement the rules accordingly. 3.33 The Revenue Secretary thanked the Hon'ble Member from Chhattisgarh and clarified that his suggestions on online games with stakes and games without stakes will be considered. 3.34 The Hon'ble Member from Meghalaya stated that he had two points to make. First point was regarding Rule 31B which states that the supply shall be total amount paid to or deposited with the supplier by way of money or money's worth. He informed that there are three scenarios in this online gaming taxation. The first scenario which prevailed before the bringing the proposal of taxation of casino, race course and online gaming in GST Council which means that 18% tax was being charged on platform fee on every transaction being played. The second scenario in which tax at the rate of 28% on full amount of each game would lead to large amount of taxation. In the third scenario, the tax rate of 28% is payable only when one buys the chips in casino. If the third scenario is implemented, it may not lead to much revenue growth. 3.35 The Revenue Secretary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Home Affairs and MeitY for bringing legislation to ban online games. The Hon'ble Member also expressed his agreement with taxing of betting, gambling , casinos, online games at 28% on face value. Apart from that , in order to give a wider definition, the word wagering which means 'risk (a sum of money or valued items) against someone else on the basis of the outcome of an unpredictable event may be included in section 2(102A) of CGST Act, 2017. 3.38 The Hon'ble Member from Andhra Pradesh stated that the State of Andhra Pradesh reiterates its stand taken in the , last GST council meeting. He stated that the issue of taxation on casino, race course and online gaming involves both taxation from the GST point of view and revenue from the State point of view. The Member highlighted the issue regarding hill States, North-Eastern States with international borders, small States specifically Goa; that the economic activity of these States like Forest and Mining are constrained by environmental and infrastructural challenges. He further stated that the economy of Goa depends on tourism and Casinos. The Hon'ble Member suggested that as Goa accepted 28% rate of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the matter to the Law Committee. 3.42 The Hon'ble Member from West Bengal stated that the Council had taken the decision in its 50th meeting on the issue of Casinos, Race Course and Online Gaming after discussions and it should not be reopened. She expressed agreement with the Hon ' ble Member from Uttar Pradesh that the issue had come to an end as the entire issues was discussed in last meeting of the Council held on 11th July, 2023 and the present matter of discussion was regarding changes in proposed Rules by the Law Committee. It is always open for the Council to re-visit it if anyone finds difficulties. 3.43 The Secretary added that as most of members agreed to the proposal in the agenda, the amendment is required to be carried out in CGST Act by the Centre and in SGST Acts by the States and they have to be synchronised. He elicited the views of the Hon'ble Members in carrying out the requisite amendments in two months so that they can be made effective from 01.10.2023. 3.44 The Hon ' ble Member from Delhi expressed her disagreement with the decision taken by the Council on the issue of Online Gaming. She also opined that the decision tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t an order for blocking these Companies has been passed by the METTY which was now being implemented by the DoT. 3.49 The Hon ' ble Member from Delhi stated that she did not doubt the intent of the Council but was concerned about the IT abilities of these illegal Companies. She pointed out that the time taken by the Government procedure and formalities to pass an order for blocking these Companies resulted in creation of a number of mirror websites by these setups. She stated that if the recommendation to i nclude online money gaming as an actionable claim is to be implemented, then the Council must be cognizant of the fact that it would promote illegal gambling. She emphasized that such a move would not only impact the Online Gaming Industry but also the entire Start-up ecosystem. 3.50 She highlighted that there was still a juncture to address this concern and once the Council passed the legislation, any future change would become very difficult. 3.51 The Chairperson responded to the concerns raised by the Hon'ble Member from Delhi and assured that all the points brought forward had been under deliberation since the beginning and were considered c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meeting but rather to progress in determining the full-face value of the supply to be taxed. 3.54 The representative of Goa expressed that he has consistently supported the 28% tax rate as decided by the Council for the Casinos. His concern lies primarily in the methodology to be implemented in the law for its execution. He drew attention to the proposed amendments for online gaming, which he believed bring the relief intended. He emphasized that the Casino Industry is confined only to the States of Goa and Sikkim. While he clarified that he did not endorse Casinos, he was worried about the economic repercussions on these States as a substantial portion of their revenue depends on the Casino Industry. He pointed out that the concept of 'full face value' remains ambiguous, especially considering that certain activities in Casinos also involve direct payments from credit card, etc. without the need for purchase of chips. He recommended that the Law Committee together with State of Goa and Sikkim, collaboratively devise rules that align with a system not detrimental to the Casino Industry. He noted that the Ministry of Electronics and Information Technology (Me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hon'ble Member from Maharashtra as he was preoccupied in unscheduled and unavoidable work during ongoing Assembly session. The CST presented his views and stated that the decision was taken in the 50th meeting of the Council to charge 28% tax on full face value and the State of Maharashtra was in agreement to all the amendments proposed in the Council agenda. He further stated that this issue has been longstanding for last almost 2.5 years due to which the revenue of the governments was also getting affected thus, the issue should be implemented steadfast, which could be reviewed again in the Council meeting if any need arose. 3.58 The Hon'ble Member from Gujarat urged the Council to move forward with the proposed amendments without delay, considering the prolonged deliberations and the urgency to address the revenue concerns. 3.59 The Hon'ble Member from Chhattisgarh appealed to Goa that decisions taken with the greater wisdom of the Council were certainly in the interest of all the States in the long run. He then apprised the Council about the forthcoming elections in his State in November and the enforcement of Code of Conduct from October, thus, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f supply, which would require going through the legislative process. The valuation methods and tax rates are provided in the Rules and notifications, which can be amended by the Council at any time if any adverse impacts arise. The Secretary further informed the Council about a Special Leave Petition filed against the judgment of the Hon'ble High Court of Karnataka in the case of M/s Gameskraft wherein it is being contested that these online gaming has an element of gambling/betting and must be taxable. The Council is making it clear that online money gaming, casinos, or horse racing are taxable irrespective of the presence of elements of betting or gambling through the decision taken in the 50th meeting. 3.68 While noting that all of States are in agreement, he acknowledged the differing viewpoints of Goa, Sikkim, Delhi and Punjab. Nonetheless, he urged the Council to proceed with implementation highlighting the possibility of revisiting the decision should the need arise. The Secretary informed the Council that similar apprehensions were made when 28% tax was proposed to be charged in case of lottery and it was feared that time also that the industry would be wiped ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and shared with the State of Tamil Nadu. 3.75 The Hon'ble Representative of Goa put his dissent to the decision and requested not to call it unanimous decision. He reiterated his suggestion to work out a mechanism where the decision taken could align with the law in a way it did not affect the States and the Industry or to review the present decision taken in three months. 3.76 The Hon'ble Member from Delhi also requested to not call the decision 'unanimous' as they had strong reservations. 3.77 The Hon'ble Member from Sikkim agreed with the points raised by Goa and emphasized to maintain the federal structure of the country in any decision-making process. 3.78 The Secretary informed that all the States except the State of Goa, Sikkim, Delhi and Punjab were in agreement with the proposed amendments. 3.79 The Chairperson expressed her gratitude to all the Members for attending the meeting, which focused on implementing the decision taken during the 50th Council Meeting to amend the law accordingly. She acknowledged the importance of this issue for some States and respected their views. The present meeting was convened to facilitate ..... 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