India’s GST authorities target land-based casinos for $1.2bn

Maria Debrincat July 24, 2023

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India’s GST authorities target land-based casinos for $1.2bn

India’s Goods and Services Tax (GST) authorities are intensifying efforts to recover GST from the online gaming industry, and are now extending their focus to land-based casinos in Goa and Sikkim states. According to reports from CNBC-TV18, the Directorate General of GST Intelligence (DGGI) is targeting approximately twelve casinos in these two states, which are the only ones that permit casino operations.

The DGGI alleges that these casinos have been evading GST payments by opting for a lower tax rate of 18 percent, instead of the full 28 percent rate that the DGGI argues should apply to casino revenue. In addition to this, some of the casinos have allegedly made fraudulent tax credit claims. However, the specific names of the targeted casinos have not been disclosed in the reports.

The investigation into these casinos by the DGGI reportedly began before a GST Council meeting on July 11. During the meeting, it was decided to impose a 28 percent GST on gaming volume rather than gross gaming revenue. This decision has caused concern among businesses, particularly startups, in the online skill gaming industry, as they fear overwhelming tax burdens.

Land-based casinos might face a more significant impact from the GST crackdown due to the nature of their offerings, which largely consist of chance-based games like baccarat, roulette, and slot machines. Unlike skill-based games such as poker, rummy, and fantasy sports, chance-based games do not have the same constitutional protections, limiting legal recourse options for the casinos.

Even though state high court orders have supported the gaming industry, the GST Council refused to differentiate between skill and chance-based gaming, prompting concerns and appeals. The finance ministry claimed that the 28 percent GST on gaming volume for casinos, online gaming, and horseracing has always been in effect, and the recent council meeting merely reaffirmed this stance, denying that it was retroactive.

While finance officials view the inclusion of these sectors by name in tax law amendments as a clarification measure, legal counsels for some gaming companies disagree. They plan to challenge these amendments through lawsuits, especially if the long-standing Supreme Court decisions recognising skill-based games as distinct from “gambling” are disregarded.

On a separate note, the Turf Authorities of India expressed disappointment over the GST Council’s decision on July 11, warning that the imposition of the 28 percent volume tax could have severe consequences for the horseracing industry, which has already been impacted by the COVID-19 pandemic. They fear potential closures and widespread unemployment if the tax is not reviewed and revised.