GoM to examine valuation of services by casinos, e-gaming

New Delhi: The government has set up a panel of state ministers for better valuation of services of casinos, online gaming portal and race courses for levying goods and services tax (GST).

The seven-member panel, convened by Gujarat Deputy Chief Minister Nitin Patel, will also examine whether any change is required in the legal provision for better means of valuation of these services.

The group of ministers (GoM) will "examine the issue of valuation of services provided by casinos, race courses, and online gaming portals and taxability of certain transactions in a casino, with reference to the current legal provisions and orders of courts," said its terms of reference (ToR).

It will also examine the administration of such valuation provisions and if an alternative means of valuation is recommended.

The panel would also look into the impact of such valuation on other similarly placed services like lottery.

The other members of the GoM include Maharashtra Deputy Chief Minister Ajit Pawar, West Bengal Finance Minister Amit Mitra, Arunachal Pradesh Deputy Chief Minister Chowna Mein, Goa Transport Minister Mauvin Godinho, Karnataka Home Minister Basavaraj Bommai and Tamil Nadu Finance Minister P Thiagarajan.

The panel would submit its report to the GST Council, chaired by Union Finance Minister and comprising state Finance Ministers, within six months.

AMRG and Associates Senior Partner Rajat Mohan said, "In the pandemic period, the online gaming sector, including casino, has seen massive user traction and flow of investments.

"Online gaming companies are in nascent stages in India, leading to multiple unresolved issues around taxation and valuation, posing a big challenge for the entire industry. Now a GoM has been constituted to understand, examine and resolve the uncertainty surrounding the valuation of services by casinos, race courses, and online gaming companies," Mohan added.

Currently, services of casinos, horse racing and online gaming attract 18 per cent GST. The GoM would decide on the method of valuing the services.

Moreover, another state ministerial panel will look into the possibility of levying GST in evasion prone sectors like pan-masala, gutkha, and brick kilns on the basis of their manufacturing capacity.

The seven-member Group of Ministers (GoM) under Odisha Finance Minister Niranjan Pujari will also examine charging GST on a reverse charge basis on mentha oil and other supplies to such sectors to check evasion.

The GoM on 'capacity based taxation and special composition scheme in certain sectors in GST' will submit its report to the GST Council within six months.

The panel will "examine the possibility to levy GST based on the capacity of manufacturing unit and special composition schemes in certain evasion prone sectors like pan masala, gutkha, brick kilns, sand mining etc. with reference to the current legal provisions," as per the Terms of Reference (ToR).

It will also look into any other administrative or systemic mechanism to plug leakages in these sectors.

Experts said that bringing Mentha oil, which is a key component in pan masala, under the reverse charge mechanism (RCM) will help curb tax evasion as GST registered dealers will have to pay the tax in case even if they procure goods from unregistered businesses.

Commodities like pan masala are prone to tax evasion as they are available in small sachets and are bought mostly in cash and hence tracking their final supplies is difficult.

The other members of the GoM are Delhi Deputy Chief Minister Manish Sisodia, Haryana Deputy Chief Dushyant Chautala, Kerala Finance Minister K N Balagopal, Madhya Pradesh Finance Minister Jagdish Devda, Uttar Pradesh Finance Minister Suresh Khanna and Uttarakhand Agriculture Minister Subodh Uniyal.

AMRG & Associates Senior Partner Rajat Mohan said in the erstwhile excise regime, several high tax evasion sectors were taxed based on the maximum machinery capacity installed rather than the actual production and sale thereof.

Capacity-based taxation would open up a Pandora's Box for tax jurisdictions managing and assessing the units of pan masala, gutkha, brick kiln, sand mining and hence a GoM has been set up to examine it, he added.