Explained: Impact Of New GST Rules On Online Gaming, Auto Sector, Cinema

The GST Council has announced that the bets placed in online gaming and casinos will now face 28 per cent tax. Among the other changes announced by the council on Tuesday was the reduction of tax on food and beverages sold at multiplexes, and tweaking the definition of utility vehicles for taxation.

Here are the major changes announced by the GST council:

Online Gaming

With an aim of discouraging young people from getting addicted to online gaming, the council on Tuesday announce that a 28 per cent tax would be levied on the full face value of bets placed on online sites. The tax on online gaming companies would be imposed without making any differentiation based on whether the games required skill or were based on chance.

Union finance minister Nirmala Sitharaman said the decision to levy maximum tax on online gaming and casinos was not intended to kill the industry but considering the "moral question" that it cannot be taxed at par with essential commodities.

The All India Gaming Federation (AIGF), which represents companies like Nazara, GamesKraft, Zupee and Winzo, said the decision by the council is unconstitutional, irrational, and egregious.

"The decision ignores over 60 years of settled legal jurisprudence and lumps online skill gaming with gambling activities. This decision will wipe out the entire Indian gaming industry and lead to lakhs of job losses and the only people benefitting from this will be anti-national illegal offshore platforms," AIGF CEO Roland Landers said.

Auto

The GST Council announced that the definition of an SUV will include only the length (4 metres and above), engine capacity (1,500 cc and more), and ground clearance (unladen ground clearance of 170 mm and more).

Auto industry experts feel that this tweak in definition will provide clarity on the taxation structure for utility vehicles, ensuring that the rate entry is more precise leaving little room for interpretation on the ambit of ground clearance.

Cinema

Food and beverages consumed in cinema halls will now attract a GST of 5 per cent, equivalent to the levy charged in hotels and restaurants, instead of 18 per cent which in many cases the cinema halls were charging.

Multiplex operators welcomed the announcement saying that it will help in the revival of the theatre business post-Covid and avoid litigations.

PVR INOX Ltd CFO Nitin Sood said: "The entire cinema industry welcomes the clarification issued by the GST Council today that food and beverages sold at the cinemas will get covered under the definition of 'restaurant service' and would be liable to GST @5 per cent (without availment of input tax credit)."

"The above clarification will help resolve the industry-wide issue for the sector which includes more than 9,000 cinemas across the country in avoiding disputes/ litigation from a GST standpoint, giving tax certainty and help in revival of the theatre business post-pandemic," he added.