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Business

RWITC chairman positive about GST change for horse betting

Newly elected chairman of the Royal Western India Turf Club (RWITC) Zavaray Poonawalla opined that the Goods and Services Tax (GST) regime for betting on horse racing will soon change and tax will be levied on the commission retained by clubs and bookmakers rather than the face value of bets.

Poonawalla while speaking to The Times of India remarked that the Fitment Committee of the GST Council feels that GST should be taxed on the commission/rake rather than face value of bets.

The RWITC chairman added that the issues of horse racing industry could not be taken up due to paucity of time at the previous GST Council meeting in Goa, and only two ministers could speak on the issue.

He added that the matter has been referred to the Group of Ministers (GoM) panel, which would also be looking into similar concerns of tax on face value being imposed on the casino and lottery industries and would probably meet next month to discuss the issue.

Poonawalla added that the turf clubs, who had made several representations on this issue to the government in the past, would once again apprise the ministers of West Bengal, Maharashtra and Tamil Nadu, who are members of the GoM and have allowed licensed race courses in their respective states, about the negative impact of the current regime of charging GST on the face value of bets on the sport of horse racing, which employs lakhs of people.

Categories
Gaming

Turf authorities petition Piyush Goyal to reduce GST on horse racing

The Turf Authorities of India (TAI), an apex body of the six racing clubs in India made a representation to Union Minister Piyush Goyal on 14th February, 2019 requesting for a change in the Goods and Services Tax (GST) rate that is charged on bets taken by race clubs and bookmakers.

The conglomeration of turf clubs, in their representation to Minister Goyal, (who at the time of the TAI representation held the Finance portfolio) stated that the 28% GST that is currently being charged on the face value of the bets made and not on the commission or earnings by the club, which is unfair and resulting in a huge loss of revenue.

Further, TAI has contended that as per a Supreme Court decision, horse racing and betting on it has been held to be a game of skill and exempt from the definition of gambling, therefore the classification of horse race betting under the category of gambling and as a good instead of service is incorrect.

According to TAI, the total taxes paid to various state governments before implementation of GST (in the financial year 2016-17) were Rs. 305 crores while the taxes paid in the transition period of GST implementation of 2017-18 was Rs. 186 crores. TAI also stated that revenues will progressively slide due to the high tax rate in the subsequent years leading to even more reduced turnover of race clubs and less tax collections for the government.

Apart from the horse racing clubs, the lottery industry has also complained that a GST rate of 28% on the face value of lottery tickets has lead to a huge reduction in business and loss of many jobs.

In December last year, the Mumbai police raided and arrested race course bookmakers and lottery parlour owners for alleged evasion and non-payment of GST. Tax authorities have also raided and slapped evasion cases against several top lottery marketing and distribution companies.

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Gaming

RummyCircle parent company launches new fantasy website My11Circle

Play Games24x7 Private Limited, the parent company of online rummy market leader RummyCircle, has launched a new fantasy sports portal called ‘My11Circle’.

The My11Circle platform is slated to initially offer fantasy sports contests on domestic and international cricket games, and is scheduled to also add other sport contests in the near future.

The company, through a press release, noted the USP of My11Circle would be fast cash rewards and live player statistics as well as live scores that would be available on the platform.

Commenting on the launch, Bhavin Pandya, Co-CEO and Co-Founder of Play Games24x7 noted, “Today is a very important day for Play Games24x7 as we launch our first ever fantasy game. We, of course, start with cricket but the goal is to offer multiple games in this format. Our focus on understanding player behavior has enabled us to provide awesome game playing experiences and we shall continue that endeavor by providing awesome fantasy cricket experiences to our players.”

Saroj Panigrahi, Business Head,  My11Circle added, “Play Games24x7 has a history of successful growth across different product platforms and is excited to introduce the My11Circle fantasy sports app for all Indian cricket lovers. Fantasy sports has great potential in our country and complements Play Games24x7’s existing portfolio perfectly.”

Besides RummyCircle, PlayGames24x7 has a social gaming mobile app called ‘Ultimate Games’ that offers games like poker, teenpatti and cricket betting. In September last year, the company had announced that it would be launching a real money horse betting website called ‘Turfbets’. The plan was later shelved as the company felt that the website could be misconstrued as a gambling product.

Categories
Gaming

Mumbai police arrest lottery centre owner, race course bookies over tax evasion

The Mumbai police raided a Carter Road-based lottery centre yesterday and arrested its owner, Rajesh Jaiswal, for allegedly evading Goods and Services Tax (GST) on lottery tickets by issuing hand-written notes instead of printed receipts.

According to the Mumbai police, Jaiswal would sell the hand written tickets to customers and tell the results over phone, thereby conducting the transaction in cash without paying any tax. A case has been registered by the police under the Lotteries (Regulation) Act, 1998 and Indian Penal Code, 1860.

The crime branch of the Mumbai police had also conducted a raid on seven different online lottery parlours in Mumbai earlier this year for GST evasion and booked the accused for cheating, forgery and selling illegal/unauthorised lottery tickets.

Last week, a similar raid was conducted by the police on bookmakers operating at the Mahalaxmi racecourse in Mumbai for allegedly accepting bets on horse-racing in cash, without paying any license fee or tax to the government. A total of 120 persons were detained by the police and cash worth Rs. 1.41 crores was seized from the licensed betting stalls within the race course.

A case of cheating under the Indian Penal Code, running a common gaming house under the Maharashtra Prevention of Gambling Act and for contravening license conditions under the Bombay Race Course Licensing Act, 1912 was registered.

Out of the 120 persons detained by the cops, 18 were formally arrested and sent to a 2-day police custody. A case was also registered against the Royal Western India Turf Club Ltd. or RWITC, i.e. the Mumbai turf club, which has been granted a license by the state government to operate a race course and accept bets on horse racing within the club.

It is perhaps unprecedented that the police, instead of the GST department, is taking action against alleged tax evaders and booking them for cheating and illegal gambling, instead of action being taken under the Goods and Services Tax law.

Categories
Gaming

RummyCircle shelves plan to launch horse betting website

Exclusive Weeks after Glaws exclusively reported that Play Games24x7 Pvt. Ltd., the parent company of leading online rummy website RummyCircle had decided to launch TurfBets.com, a portal where Indian residents can bet real money on International horse races from countries like United Kingdom, USA, France etc.; it has now emerged that the company has temporarily shelved its plans of launching the real money horse racing website.

It is understood that the company was only testing the product and response that it would receive within a closed group of persons. It is further learnt that the company was not prepared or willing to take the risk by launching an innovative website which can potentially attract negative publicity and be misunderstood as a gambling product.

As of 20th September, 2018, the TurfBets website homepage showed that the portal would be launched in the next four days. However, as of today (4th October) the website is taken down and it is shown that the page is not working due to an empty response from the server.

Although the WhoIs records on 20th September indicated that Mumbai-based Play Games24x7 was the owner of the domain ‘turfbets.com, it seems that the records have been modified and the WhoIs registry now no longer indicates that the website is owned by Play Games24x7 Pvt. Ltd.

The company has not officially indicated any reasons for discontinuing the website and whether or when it would relaunched. Glaws has reached out Play Games24x7 officials for a response. The story will be updated if and when a response is received.

Categories
Gaming

RummyCircle to start horse betting website TurfBets

Exclusive Play Games24x7 Pvt. Ltd., the company that operates leading rummy website RummyCircle, will be launching a new real money betting website focused on International horse racing in the next few days.

The website, called ‘turfbets.com’ is registered under the name of Play Games24x7 Pvt. Ltd Mumbai. As per an exclusive invitational preview link accessed by Glaws, the website TurfBets will aim to give customers based in India the best horse betting experience with races from North America, United Kingdom and France. The website further states that customers can play different races from different countries, sitting right here in India. Further, TurfBets can stream hundreds of races per day through our exclusive video player.

The services provided by the website include allowing users to place bets on live international races, providing live stream of the races and providing historical information about the performance of each horse and other race conditions.

The website is expected to start its services, initially limited to a closed group of 1000 people within the next four days. TurfBet further states that players from Assam, Odisha and Telangana are not allowed to play online horse races for prizes, given that these states do not allow games of skill for stakes.

The promoters of RummyCircle seem to have taken advantage of the fact that the Supreme Court in a judgment in Dr. KR Lakhsmanan v. State of Tamil Nadu in the year 1996 ruled that horse racing, like rummy, is a game of skill and betting and wagering on the same would consequently not fall within the ambit of gambling.

It however remains to be seen whether the innovative model adopted by RummyCircle promoters to use observations made by the Supreme Court to conduct online betting on foreign horse races will fall into any legal troubles.

Categories
Business Gaming

GST council announces 28% tax on casinos and betting; 18% tax likely on skill games; lottery tax yet to be announced

The GST Council, a constitutional body has announced tax slabs for most goods and services in the council meeting held in Srinagar on 18th and 19th May. As widely predicted, gambling and totalisator services provided by a race course as well as betting with licensed bookmakers in race courses have been placed in the 28% tax slab.

Further, entry fees charged in casinos or other entertainment events will also be charged 28% GST. It is understood that at present, there is no proposal to impose an additional cess on gambling and betting activities.

Union Finance Minister Arun Jaitley in his press conference yesterday indicated that since entertainment and luxury taxes have been merged with service tax in GST, it would only be fair that cinema halls, casinos and betting centres are placed in the highest tax slab of 28%. Currently, casinos in Goa pay a 15% gaming tax on their revenues while casinos in Sikkim pay a 10% gaming tax, in addition to a Rs. 1,000/- tax on the entry of every visitor.

While the 28% tax may prime facie seem higher than the current taxes paid by casinos, industry experts believe that with the availability of input credit on the goods and services (which at present is not available on the entertainment taxes paid by casinos) and with the abolition of the Rs. 1,000/- entry tax,  the gambling business may not be affected by the announcement of the GST council.

Experts further believe that the announcement of a unified taxation system for the gaming industry will only be beneficial in the long term.

Online skill games, which do not fall within the ambit of gambling could fall within the category of  ‘all other services not specified elsewhere’ and be subject to a 18% GST rate. Again, while this is slightly higher than the 15% service tax currently paid by online rummy, poker and fantasy sports operators, with the seamless availability of input credit and easier compliance mechanism, the sector may not be significantly impacted in the long term.

It is understood that the taxation rate on lottery tickets or service provided by lottery distributors has not been announced by the GST council. A decision on the taxation rate for lotteries is expected in the coming weeks. However, since lotteries fall within the definition of actionable claims, which have been categorised as goods under the GST law, it is believed that lotteries would fall within the 28% tax bracket.

Categories
Business Gaming

Turf Club delegation meets Finance Minister to discuss GST implications on horse-betting

Horse-racing clubs in India has for the past few months been worried about the implications of the new Goods and Services Tax (GST). GST, touted to be the largest indirect tax reform in India since independence, will subsume all indirect taxes. Taxes on skill gaming, gambling, betting, casinos, lotteries etc. will be part of GST, once it is implemented from next financial year.

With some reports indicating that bets placed on licensed race-courses and others forms of gambling and betting will be placed under the demerit or sin category and charged around 40% GST rate (the betting tax rate in Mumbai and Pune race courses is 30% while in other race courses the betting tax rate is much lower), there were concerns that the race courses would be forced to shut shop, as betting would no longer be feasible.

The Turf Authorities of India (TAI) therefore approached Union Finance Minister Arun Jaitley to apprise him of the horse-racing industry’s demands. As per a column in Mumbai Mirror, Royal Western India Turf Club’s chairman Vivek Jain led the delegation to meet Jaitley.

The report further states:

According to Jain, the finance minister gave the delegation a brief but intent hearing. Among other issues, Jain highlighted the problems faced by the horse-racing industry post demonetisation and impressed upon him that, in this time of crisis, the sport needs a friendly approach both from the Centre and the State government.

In a significant move — with the objective of a national unified tax-rate in mind — Jain requested Jaitley for a favourable consideration if and when GST comes into play between April and September, which could possibly pave the way for an all-India totalizator regime.

The report also adds that Jaitley intently heard Jain and other members of the delegation but did not give any commitment on the GST rates for horse-race betting. However unnamed experts in the report indicate that gambling and betting will be in the demerit or sin category under GST and consequently around 40% tax rate will be imposed. A decision has not yet been taken whether race-courses and betting thereof will be kept in the same category.

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Business Gaming

Gaming industry badly hit as demonetisation paralyses business, move may benefit legitimate operators in the long run

Prime Minister Narendra Modi’s sudden and drastic announcement demonetising (except for emergency services) all 500 & 1000 rupee notes , i.e. around 85% of the currency in circulation, from 9th November onwards, created chaos and panic amongst traders, business houses and most citizens.  However, cash-intensive sectors like real estate, hospitality, luxury goods and gambling seem to be the worst hit.

As per news reports, post demonetisation there have hardly been any customers in casinos in Goa, Sikkim or Nepal. “All our businesses have closed-down. We have no money (in cash) to pay people and vice versa,” the owner of a popular offshore casino is quoted to have told the Indian Express. The stock price of Delta Corp, India’s largest and only listed casino company has fallen almost 35% after the demonetisation announcement, indicating the heavy drop in revenues for the casino business.

Some other reports indicate that not just casinos but other forms of gambling like the illegal betting and matka industries have been heavily affected. “Ours is a cash-based business and the government’s decision has hit us hard. There are millions of rupees in circulation,” a Delhi-based bookie is quoted to have told Hindustan Times.

Apart from this, race-courses, where betting is legally permitted have also been affected since there is not enough liquidity for punters to place bets. The Madras, Delhi, Bangalore and Kolkata race-courses have so far cancelled their scheduled races.  Similarly, the sale of legal lotteries is also said to be impacted due to the demonetisation of the high-value currency notes.

Business of online skill gaming companies (poker, rummy, fantasy game, social gaming etc.)  however does not seem to have been as severely affected as those not having liquid cash are preferring to play games online using credit cards, debit cards and other banking channels or e-wallets.

While the unexpected move is expected to impact all gaming related businesses this financial year, it is expected that those operators offering services legally would not be impacted in the long run. However, the illegal betting, gambling parlours and matka business, said to be operated by the underworld and with gangsters having links to terrorist organisations will be severely affected as the sources of black money will be curtailed, at least in the short run.

The move will however not affect legal gaming and casino businesses beyond this financial year as currency flows are expected to return to normalcy in a month or two. In the foreseeable future, even legal gaming ventures will have to reduce reliance on cash receipts and move to plastic money or banking transactions. The demonetisation exercise should therefore be a blessing in disguise for the gaming industry and should be used as an opportunity to usher highest standards of transparency and tax compliance in the legal gaming industry, which is perceived (and sometimes unfairly so) to be a haven of black money.

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Business Gaming

Passage of GST Bill to dramatically alter the taxation structure of gaming and lottery industries

The passage of the Constitution (122nd Amendment) Bill, 2016 by both the Houses of Parliament and the central government’s announcement of its intention to implement a uniform ‘one nation, one tax’, i.e. the Goods and Services Tax (GST) by 1st April 2017, will dramatically alter the taxation structure of gaming, betting and lottery as well as online skill gaming companies in the country, according to legal experts.

As per the 122nd Constitutional Amendment Bill, unanimously passed by both Lok Sabha and Rajya Sabha, the power of state governments to tax luxuries, amusements, entertainment, gambling and betting etc. has been taken away and subsumed into an integrated tax, i.e. GST- which can be charged at the state level or central level depending on the place of supply and location of the consumer.

As per newly enacted Article 246A of the Constitution, the state governments along with the Parliament will have concurrent powers to make laws pertaining to virtually all indirect taxes, with the GST Council, a new constitutional body comprising of state and central finance ministers having the right to recommend rates for various goods and services and settling disputes between the states or the centre.

Further, gambling and betting activities have been clubbed under the category of services under the constitutional amendment, since Article 366(26A) now defines services to mean anything apart from goods.  Further, as per the model GST law, actionable claim has also been included within the ambit of services, thereby covering lotteries and gaming tax.

Although there is no clarity on the quantum of tax for either online skill games services or casinos/lottery operations, it is widely believed that the standard rate of around 22% will be applied on online skill games, while a demerit rate of 40% or more may be applied on casinos and other gaming or betting activities.

It is also widely expected that more clarity will emerge after ratification of the 122nd Constitutional Amendment Bill by state legislatures and passage of the model GST law, based on which most states will formulate the law. However, it is increasingly becoming clear that the service tax rate of 15% paid by online skill game (poker, rummy and fantasy gaming companies) will definitely go up by 5-7% while the tax rate on betting, gaming, casinos and lotteries is also likely to go up significantly higher.

Further, availing input credit, burden of filing monthly forms  and multiple registration in various states will increase the compliance costs and burden on existing gaming companies. Additionally, there is no clarity on the definition of supply in the model GST law and whether only the gaming revenue (i.e. deposits minus winnings) will be taxed.

Experts therefore have indicated that the gaming industry should be prepared for a higher tax rate from the next financial year onwards, at least for a few years and be prepared for additional compliance challenges during the transition period from service/gaming tax to GST.