New Delhi: The GST Council on Tuesday decided to levy 28% tax on the face value of “bets placed” on online games, chips purchased at casinos and bets placed with bookmakers at horse races, while slashing the tax on food and beverages sold in cinema halls.

Besides, the Council revised the definition of sports utility vehicles for levy of compensation cess and exempted certain imported medicines and food products used by those suffering from rare diseases. Services of private organizations involved in launching satellites were also exempted from GST.

Cinema goers can cheer the development, as the Council clarified that the tax will be slashed from 28% to 5% GST, which is at par with restaurants. “Where the sale of cinema ticket and supply of food and beverages are clubbed together, and such bundled supply satisfies the test of composite supply, the entire supply will attract GST at the rate applicable to service of exhibition of cinema, the principal supply,” an official statement said.

The gaming industry was, however, bitterly complaining even as finance minister Nirmala Sitharaman made it clear that the Centre and the states wanted to promote the industry, but they could not promote casinos and online games more than essential goods.

After discussing tax proposal on online gaming and casinos for almost three years, at its 50th meeting, the all-powerful panel comprising the Union and state finance ministers decided to bite the bullet amid intense lobbying by powerful players.

The proposal, which will require amendments to the law to include online games and horse racing within the purview of GST, has also ended the difference between “game of chance” and “game of skill”. “What is skill based and what is chance based isn’t what we are looking at. What we are looking at is what is being taxed,” FM Sitharaman told reporters, adding that decision was taken after extensive consultation in the Council and factoring in concerns of states that depended on casinos to attract tourists.

Industry experts are keeping close tabs on how the amendment is drafted. “India is probably the only country to levy GST on full face value on all categories of online games. The blanket proposal to levy GST on full face value on online gaming will possibly put an end to the sub-judice debate of ‘game of skill’ versus ‘game of chance’. This change will bring ‘game of skill’ on a par with wagering contracts that are in the nature of gambling and betting. From a revenue perspective the proposed amendment may significantly contribute to the exchequer and will make states like Goa and Sikkim important from revenue generation perspective. This change will need amendments under GST law especially with respect to definition and taxability of actionable claims under GST. What remains to be seen is whether this change is going to apply prospectively or have a retrospective impact,” said Kishore Kumar, who leads the indirect tax practice at Taxmann.