The gaming industry wants the Govt to reconsider the 28% GST rate, saying it is too steep.
The GST Council discussed the issue threadbare. There was a Group of Ministers (GoM) working on the subject for two years, it deliberated extensively and reported back to the Council. The decision to levy 28% GST on online gaming was taken after exhaustive discussions. The Council heard every point of view before deciding on this.
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Was there a consensus?
Yes. They was an overwhelming consensus. In fact, overwhelming is an understatement. The consensus was near unanimous. Many states said we should go for the highest tax rate. The overall sentiment was on the higher side of the tax.
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But online gaming firms say the new tax rate will make them unviable.What is the reason to incentivize online gambling? They are sucking in huge money from the younger generation. How is online games-based betting different from other betting? We have put all such betting activities in one category.
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One point of view is the Council has made no distinction between games of skill and games of chance.
Are we justifying betting? There is skill involved in cricket also. Should we allow betting on cricket, archery, athletics etc.? So here the issue is not the one about skill or chance, but about betting. There is a consensus in this country that betting is an undesirable activity. Now, what is the justification to incentivize betting by putting a lower tax? I do not find any merit in the argument that one form of betting must be incentivized.
In GST, we have higher taxes on luxury items and on sin goods and services. In fact, there should have been a cess on all forms of betting, but the Council in its wisdom has fixed the rate only at 28% and not ventured beyond that. In the case of other sin and luxury goods or services, we have gone to the extent of putting a cess also. So, I find no merit in this argument for lower taxes. Betting is a form of gambling.
What you are trying to hide by dragging us into the conversation of skill and chance is that you’re trying to hide that it is basically a betting activity. So, the council has taken a view that whether it is a skill or chance, it is betting. We have brought that under one broad category, whether it is betting in casinos, horse racing or online games.
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What is the global scenario?
Each country has its own method. Some are taxing on the overall face value, while others have a different calculation. India does not have to follow others. We have our own context and challenges. Our society considers many things as undesirable. Horse racing, for example, happens only in five or six states. Can we say it should be allowed in every state? Liquor is banned in Gujarat because there is a legacy. Should we introduce it there? Or should we ban liquor across the country? No. We have our own social values evolved over time. From the time of Mahabharata, betting is not viewed as a positive though it has been around. It has always been considered as an undesirable indulgence.
Are you in favour of a ban on betting in online games?
People at all age groups have become addicted to these online games. So, it is a new form of addiction. One may ask there are many such activities and if we are going to regulate everything. No, but in this case, their financial resources are getting sucked into this. So much so that some youngsters have ended up borrowing and are unable to repay those loans. Many youngsters have committed suicide.
I find that 28% tax is eminently justified. As a government, we are putting a higher tax on undesirable activity as a form of dis-incentivizing it. On the other hand, if you put a lower tax, it will be incentivizing it.
As for a ban, Karnataka banned it, and subsequently Tamil Nadu also banned it, but the courts have taken a different view that you cannot ban this activity. If the activity is to be permitted, then it is only reasonable that we levy higher tax rates, and this is not even the highest.
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Gaming industry wants levy limited to the platform fee, not full value.
The industry is demanding that the 28% GST be put on the gross gaming revenue (GGR) so that the ratewill actually come down to some 5-6%. Do you mean activities like betting should be taxed at a lower rate than the essential food items in this country? Where is the logic in this? Where is the moral value in this?
There are concerns that the 28% rate will wipe out the gaming industry.
By virtue of that argument, every state must permit the lottery as it generates revenue. Do you mean to say every state must then legalize horse racing? Then every state must have Casinos?
What will be your position if the GST Council were to revisit the subject?
We are for the industry, and we are also for the right type of industries. I may morally disagree with online games, but as long as it is legal, our government will make sure that they will have ease of doing business in Karnataka.
We may not have acceded to their demands on the issue of taxation, but if they can grow as per our taxes, we don’t have an issue. If someone on the other hand says it (taxes) is going to drive them out or lead to underground gaming, it is an undesirable pressure they are exerting on the government. Narcotic drugs are banned, but there is an illegal trade. Does it mean we legalise them?
