GST: Karnataka to push for higher tax on betting earnings

Karnataka will spell out its stand in the meeting of the GST Council scheduled for August 2.

Karnataka is likely to ask the GST Council to consider levying a 28 per cent tax on earnings made from subsequent online bets or gambles after a user’s entry into a gaming platform.

Revenue Minister Krishna Byre Gowda discussed this with commercial tax officers on Tuesday, ahead of Wednesday’s GST Council meeting where Karnataka will spell out its stand.

The GST Council meeting on August 2 is likely to consider legal amendments necessary for implementing a 28 per cent levy on online gaming, casinos, and horse racing.

After blowback from a host of stakeholders on the issue, the GST Council may also clarify the definition of topics like online gaming and specific actionable claims on which tax will apply, including betting, gambling, horse racing, casinos and lottery.

"In the previous GST meeting, it was agreed on a flat 28 per cent GST upon entry. Now, we’re beginning to understand that when (users) enter and win some money, they redeploy that money. How do we bring that into the tax fold? If we don’t tax the second and third rounds of betting, we won't know how many times they'll redeploy that money. They may park that money in a digital wallet and use it again, which may not become a fresh bet," Gowda, who represents Karnataka in the GST Council, said.

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"The alternative idea is to not levy a tax upon entry. We tax every bet as a separate activity," Gowda said.

Deterrence is a factor while Karnataka formulates a stand on this matter. "Social policy does influence taxation. So, deterrence is also a factor. Higher taxes will, over time, act as a deterrence," Gowda said.

In 2021, the previous BJP government had prohibited and criminalised playing of games of skill including online games by risking money or otherwise. This was struck down by the Karnataka High Court.