The GST Board made a number of decisions on Tuesday, including reducing the GST on food and beverages sold in movie theatres, clarifying the commercial vehicle tax structure and imposing a 28% tax on online games and casinos. These announcements have drawn mixed reactions across all sectors.
Here are some key changes announced after the 50th GST Council meeting and what the industry thinks about them.
Food and drink in movie theaters
The GST Council, led by Finance Minister Nirmala Sitharaman and made up of representatives from all states and UT, decided on Tuesday to lower the service tax levied on food and beverages consumed in movie theaters to 5% versus 18%.
If you buy a movie ticket and food at the same time, the government considers this as one purchase. They will tax the entire purchase at the ticket rate, as it will be considered a “composite supply”.
According to a PTI report, F&B (food and beverage) is a major source of revenue for the exhibition industry and multiplexes derive up to 35% of their revenue from this segment.
“The motion picture industry as a whole welcomes the clarification issued today by the GST Board that food and beverages sold in movie theaters will fall under the definition of ‘food service’ and would be subject to to GST @ 5% (not eligible for input tax credit),” PVR INOX Ltd chief financial officer Nitin Sood told the news agency, welcoming the change.
“The above clarification will help resolve the industry-wide issue for the sector, which includes over 9,000 theaters across the country, avoiding disputes/litigations from a GST perspective, by giving tax certainty and helping to revive theatrical activity after the pandemic,” he added.
“From a financial point of view it will have no impact, but from a litigation point of view there is relief. Now there is clarity for the sector, which has emerged now that for all the food products that you have, the GST would remain at 5%,” Karan Taurani, SVP of Elara Capital, said, according to the news agency.
Clarity on the definition of utility vehicles
The GST Council has decided to amend the compensation notification to include all commercial vehicles, whatever their name, provided they meet the parameters of length greater than 4000 mm, engine capacity greater than 1500 cc and a guard to the ground of 170 mm. All CUVs, SUVs and XUVs will now benefit from a 22% offset on top of the existing 28% GST.
Previously, only SUVs over 4000mm in length and with a cylinder capacity of more than 1.5 liters were subject to a 22% allowance. However, the definition of an SUV has now been expanded to include any vehicle that meets the criteria listed above. According to a report by Financial Express, the change means that many popular vehicles, such as Maruti Suzuki Ertiga, Grand Vitara, Toyota Hyryder, Maruti Suzuki Invicto, Toyota Hycross, Kia Carens, Seltos, Creta and many more, will become more expensive .
Auto industry experts believe this clarity ensures that rate entry is more accurate, leaving little room for interpretation on ground clearance range, according to a report by NDTV.
Also Read: 50th GST Council Meeting: Three GST Exempt Items, 22% Off MUV, Says FM
Online games subject to GST
The GST Board also announced a 28% tax on the total face value of online gambling, casinos and horse racing. According to Finance Minister Nirmala Sitharaman, the council is not looking to “end an industry”, but there have been discussions of the “moral question” raised by the online gambling industry.
Even BharatPe founder and famous ex-Shark Tank investor Ashneer Grover took to Twitter saying, “It was great fun to be a part of the fantasy gaming industry – which is being murdered now. 10 billion dollars out the window during this monsoon.”
“If the government thinks people will put Rs 100 to play on a pot entry of Rs 72 (28% gross TPS); and if they win Rs 54 (after platform fee) – they will pay 30% TDS on that – so they’ll have a free swimming pool in their living room on the first monsoon – that’s not going to happen!” he added.
According to NDTV’s report, the All India Gaming Federation (AIGF), which represents companies like Nazara, GamesKraft, Zupee and Winzo, said the board’s decision was unconstitutional, irrational and blatant.
Also Read: ‘May Force Gamers to Use Offshore Platforms’: As GST Board Levies 28% Online Gambling Tax, Here’s How the Industry Responds