Government hikes GST for online games, betting and SUVs, removes GST on rare disease drugs and..: All you need to know

The Goods and Service Tax (GST) Council after its 50^th meeting in New Delhi on Tuesday, announced some changes in the tax regime. The GST Council has said that online gaming, horse racing and casinos will now be taxed 28% on its full face value.

This now means that there is no distinction between ‘game of skill’ and ‘game of chance’. This was in the process for a long time as in the previous meeting of the ‘Group of Ministers’ (GOM), they had agreed to the proposed taxes for the said activities but there was no consensus on online gaming as Goa had proposed only 18% that too on the platform fees.

“GST of 28 % on the full value of bets on online gaming, horse racing and casino will be a major damper to the gaming industry. The online gaming companies will be hit in a big way,” said Parag Mehta, Partner, N.A. Shah Associates said.

There has been much criticism from the gaming industry on this move, with many industry leaders claiming that this will adversely impact them and will cut their profits or maybe even make them go into losses which will make it difficult to develop new games and technologies. According to them, this will also undermine the competitiveness of the market.

It is also certain that gaming companies will be challenging these amendments in GST laws when they are brought into force on constitutional grounds. The industry will also be looking for interim relief from the courts when this amendment comes into force.

The GST Council has also announced that the food and beverage (F&B) inside cinema halls will now be charged 5% as compared to the earlier 18%. This means popcorn and other food items inside cinema halls which are already very overpriced will now be a bit cheaper.

The council also shed light on the sale of cinema tickets and supply of eatables such as popcorn or cold drinks etc., when clubbed and sold together, the entire supply should be treated as composite supply and taxed as per the applicable rate of the principal supply, which in this case is cinema ticket.

This comes as a piece of good news as many state governments were lobbying to charge different taxes on different eateries. Now, there will not be any disparity and will provide clarity to the sellers.

Other products which see a reduction in GST are uncooked food palette, fish and soluble paste, where tax will now be 5%. The Council has also exempted the tax on import on Cancer treatment drugs and Food for Special Medical Purposes (FSMP) used in the treatment of rare diseases. The drug currently has a 12% integrated GST.

The prices of large utility vehicles which includes SUV and MUV will now increase. SUVs which are more than 4 meters will now be taxed 2% percent more with the GST increasing the cess by 200 points, taking the tax from 20% to 22%. The Council also decided on the definition of Utility vehicles and tightened norms for registration. A clarity has also been provided on MUVs, that says that the GST Council has agreed to the recommendation to increase the compensation cess to 22% from the previous 20%. However, Sedans will not be included in the list which sees an increase in taxes, as two states; Punjab and Tamil Nadu were against that.

The GST Council has also announced the set up of an appellate tribunal, saying that many states requested for benches during the meet. The Finance Minister also said that no request will be denied.