Earlier this year, casinos in Goa were hit with a service tax on their license fees by Goa’s indirect tax department. Casino owners and operators balked at the idea, asserting that Goa had no legal authority to demand the tax. It now appears as though they are probably correct, as the Bombay High Court is demanding that the Goa tax department justify why the service fees were introduced.

This past January, the tax department issued ten notices to the largest casinos in Goa and asked them to pay a tax on license fees for a three-year period that ran from 2014 to 2016. The casinos didn’t agree and filed their case with the courts.

A writ petition filed with the Goa bench of the High Court by attorney Abhishek Rastogi after the service fee was introduced argued that it amounted to a statutory levy, as opposed to a fee for services implemented by the state government. As such, it was outside the definition of a service tax. “Demanding tax on statutory license fees is absurd. It’s like demanding a tax on passport fees paid to the government. Based on a circular, the DRI has initiated an investigation for applicability of service tax,” he said.

He added, “The issue is expected to be pragmatically resolved by the GST Council, as has been the past experience. The repercussions of the unresolved issue are very serious and huge impact could be on other activities.”