GST on Gambling and Casino
With the rise of middle class and their disposable income, there is a rise in the no of gamblers, betters and casino goers. The increase communication by way mobile and data revolution has further fueled this tendency. The principal legislative document that makes gambling in India prohibited is the Public gambling act 1867. It prohibits running or being in charge of a public gaming house or a ‘Casino’. If someone breaks this rule there is a provision of penalty up to INR 200 or imprisonment of up to 3 months. It should be noted that under the federal structure in India, states have the right to formulate their own lottery and gambling rule. Currently, out of 29 states and 7 Union Territories, only 3 of them allow casinos as legal. Goa, Sikkim and Daman and Diu are the only states and UT in which gambling is legal.
The Public gambling act 1867 explicitly allows skill games it says “nothing in this Act shall apply to games of mere skill wherever played “. There are important pronouncements by the courts in India which makes horse race betting, rummy etc as skill games. Games such as Cricket fantasy leagues which involve real money are also considered as legal as they involve skill. However, activities such as cricket betting, flush (teen patti) are still considered illegal.
Gambling/ Casino under GST Law
Now since some of the states have legalized casino and other allied activates it is important to understand their taxability under GST.
CBEC Vide notification No. 11/2017-Central Tax (Rate) dated the 28th June 2017 entry 34, has levied GST on the service of admission into a casino under Heading 9996 (Recreational, cultural and sporting services) has been levied @ 28%. Thus it clear that any amount collected by casino by way of entry charges or admission fees will be taxable. Also, Gambling has been captured in entry no 34 (V) of the said notification which makes gambling taxable as well.
Value of supply rule does not specify the method of determining the taxable amount in case of casino and gambling, Casino Operators were facing a lot of difficulty in finding the taxable value upon which they have to collect GST. There have many disputes in opinion on the taxable value of services upon which the GST was to be levied. CBEC vide Circular No. 27/01/2018-GST dated 04th January 2018 has clarified that Since both “Services by way of admission to casino” and “gambling” has been covered separately in entry no 34 both the service will be separately taxable. The value shall be determined for both the activities separately as per section 15 of the CGST Act and 28% will be charged accordingly.
For example, A person goes into a casino and pays INR 1000 for admission, he further pays INR 5000 for chips used in gambling. The casino should charge 28% on INR 1000 and INR 5000 separately. It makes the total taxable value INR 6000 for that person. In case if the person has order food of INR 500, it shall be taxable at the rate of 5%.
All skill-based games such as Horse race betting and Cricket fantasy leagues will attract a GST. However, the provision in rate schedule notification No. 11/2017-Central Tax (Rate) dated the 28th June 2017 does not clearly state the tax base to levy GST on horse racing or similar skill based games
CBEC has clarified that GST would be leviable on the entire bet value i.e. the total of the face value of any or all bets paid into the totalisator or placed with licensed bookmakers, as the case may be.
For example: If a person is betting INR 1000 for Horse race betting INR 28 should be collected from him as GST.
A casino owner is no exception to the rule of ITC. He can claim the credit of all the GST which he has paid for the activities used for the furtherance of his business.
Relevant entry from Notification No. 11/2017-Central Tax (Rate) dated 28th June 2017:
|Entry No 34||Heading||Description of Service||Rate|
|Heading 9996 (Recreational, cultural and sporting services)||6 (Recreational, cultural and sporting services) (i) Services by way of admission or access to circus, Indian classical dance including folk dance, theatrical performance, drama||9%|
|(ii) Services by way of admission exhibition of cinematograph films where price of admission ticket is one hundred rupees or less.||9%|
|(iii) Services by way of admission to entertainment events or access to amusement facilities including exhibition of cinematograph films, theme parks, water parks, joy rides, merry-go rounds, go-carting, casinos, race-course, ballet, any sporting event such as Indian Premier League and the like||14%|
|(iv) Services provided by a race club by way of totalisator or a license to bookmaker in such club.||14%|
|(vi) Recreational, cultural and sporting services other than (i), (ii), (iii), (iv) and (v) above.||9%|
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