Revenue Secretary Sanjay Malhotra opens up on GST Council’s decision

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Revenue Secretary Sanjay Malhotra recently talked about the decision on tax rate announced by the GST council during an interview with CNBC.

Malhotra informs that the decision came neither from the centre nor any state individually but was agreed upon unanimously. He further clarified again that the GST rate will be 28% and will be levied on full face value for online gaming, casinos and horse racing.

Responding to the companies arguing that these are actionable claims and do not amount to gambling, Malhotra clarifies that online games, when played with the expectation of return on the outcome, become a taxable actionable claim.

The GST department also recently lost a court case which was also mentioned by Malhotra, although he did not mention the name. To take care of the past dues, he revealed that they will be filing another case in Supreme Court.

Last year, the government collected Rs 1,700 crore in tax, which was believed to be only around 2% of the total turnover. With a GST rate of 28%, it can increase up to 10 times. Taxing online gaming companies at 18% of gross gaming revenue causes a significant loss of revenue to the government. With a tax rate of 28%, the revenue can be increased along with the principle of equity.

For the companies operating from outside of India, he says that a mechanism for tax collection at source can be established at the time of initial payment.

The gaming companies also claimed that the decision is bad for the online gaming sector in India and said the new GST rate basically cripples it. Further, the companies claim that the new tax rate is opposite to the recent announcement for online gaming rules by MeitY, planning the growth of the sector.

Malhotra made clear that the companies are only talking about the real money gaming sector, which is only a part of the overall gaming sector containing casual games and esports. He told while the rules for gaming can vary in states, the taxation policy is different from regulation.

He mentioned that the companies may apply for reconsideration, which may be discussed by the council. Although, in his opinion, the council as a whole is satisfied with the current decision, and there is no further need for changes.

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