DRI takes a slice of casino licence fee

PANAJI: Of the 15 offshore and onshore casinos operating in the state, over 10 have paid service tax to the Directorate of Revenue Intelligence (DRI) on the licence fee paid to the state government.

Three months ago, DRI had issued notices to the casinos operators in the state. Speaking to TOI, one casino operator said that, initially, they were opposed to paying service tax on casino licence fee, but later most of them paid it.

One casino operator said that, as per the 2016 notification, service tax is payable to state and central government. Interpreting the notification, DRI issued notices to casino operators to pay the service tax on casino licence fee for three years, from 2014 to 2016, the operator said.

There are six offshore casinos and nine onshore casinos operating in the state. Onshore casinos are operating only in five-star hotels.

Some casino owners have challenged the tax demands and taken the matter to court arguing that licence fees they pay to the government are equivalent to a permission and there is no legal ground for the tax demand. Operators have to pay licence fees to the state government to run their businesses.

"Demanding tax on statutory licence fees is absurd. It's like demanding tax on passport fees paid to the government. Based on a circular, the DRI has initiated investigation for applicability of service tax," Abhishek A Rastogi, partner, Khaitan & Co, who filed a writ petition in this regard with the Goa bench of the Bombay high court told ET.

As per the notice, about 15% tax is applicable on the licence fee. The tax department's rationale is that services provided by casinos can be categorised as goods as they "reserve the right to enter" for customers.

"Many casinos have paid service tax on reverse charge basis and hence should not be expected to pay any other indirect tax. Further, since entertainment tax has been subsumed in GST, similar issues may not arise in future," M S Mani, partner, Deloitte India told ET.

"There needs to be an element of service and quid pro quo for an activity to be taxable," said Rastogi.