Government hikes GST for Online games and removes GST on rare disease drugs

The 50th Goods and Services Tax (GST) Council meeting on Tuesday decided that a 28% GST will be levied on the full face value of online gaming. The move deals a severe blow to the gaming companies that offer real-money games.

This indicates that there is no longer a distinction between a “game of skill” and a “game of chance.” This has been in the works for quite some time, since the last meeting of the ‘Group of Ministers’ (GOM) had agreed to the proposed taxes for the aforementioned activities, but there was no agreement on online gambling, as Goa had offered only 18% on platform fees.

“A 28% GST on the total value of bets on online gaming, horse racing, and casinos will be a major stumbling block for the gaming industry.” “Online gaming companies will be severely impacted,” stated Parag Mehta, Partner at N.A. Shah Associates.

The gaming industry has been very critical of this decision, with many industry executives arguing that it would have a negative influence on company profitability or perhaps cause companies to run into losses, making it harder to create new games and technology. According to them, this will also reduce market competition.
It is also inevitable that gambling corporations would challenge these GST legislation revisions on constitutional grounds when they become effective. When this change takes effect, the industry will also seek interim relief from the courts.

The council announced that GST on restaurants inside Cineplex will attract 5 per cent GST against 18 per cent earlier.

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 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.