At the GST Council meeting, was there a moral and social consideration to the decision to levy 28% GST on gaming?
Yes, some of the members did raise the issue that online games, when played for stakes on outcomes, have an element of betting, which can be addictive. So that was also a factor that weighed on the mind of some of the ministers. It may also have an economic rationale because people will hopefully use this time for more productive activities. And let me clarify that online games when played without stakes continue to be taxed at 18%. The 28% tax is only when there is wagering on the outcome of a game ,whether it’s a game of skill or chance is not important. It is wagering and that attracts a higher tax rate, as it should be.
The industry is now apprehensive that a lot of FDI is coming into the sector and this (GST) reflects badly on our investment regime. How do you respond to that?
The investment has to follow the needs of the society, of the government, of the public.
‘28% GST may Fetch Govt ₹15-20,000 cr’
So if online gaming continues to be in demand by the public, there will be investments. If it is not, then it will be in some other sectors where there is demand. The investment has to be as per the needs of the country, in areas where the country needs it.Many companies were saying that the decision will give an advantage to illegal platforms and will force them to move offshore. How would you respond to that?
First of all, it will be our attempt to provide a level playing field for both offshore and onshore. We would, in fact, encourage whatever businesses are there, whether offline or online, they are within the country. So whatever is required to be done for that, we will do, including looking at payment channels, or the provisions of TCS (tax collected at source) if required or even regulating such activities to be done only from the country. You said payment channel… what could that be?
Irrespective of the location of the business, our effort will be to protect tax. There are certain measures and we will see how best we can take them. TCS is obviously one of the possibilities. TCS can be imposed on the payment service providers if we are able to identify online gaming companies.
Now that there is clarity about the tax – 28% on the full face value – what kind of revenue do you expect from the gaming sector?
Rs 1,700 crore is the revenue we got in 2022-23. If the volumes remain the same, our estimate is that it would be 10 times the volume we got last year which should be about Rs 15,000-20,000 crore. So, if the demand is inelastic and people are actually addicted to it, then the government gains in revenue. On the other hand, if the demand is elastic, then a social purpose is being served because as some of the ministers in the council mentioned, it is addictive and against our social values because it is betting. It may also have an economic rationale because people will hopefully use this time in more productive activities.
These online gaming companies are effectively paying taxes at only 2-3% right now, which is not justified by any means as it is even less than 5%, which is the rate of tax on some of the food products.
Some states have banned gaming. Will the amendment take care of that part or will it be limited to taxation?
Lottery is banned in some states. The council has not banned it. It is for the states, competent departments or ministries to decide. It is not within the council’s purview to ban or prohibit or regulate any activity. The council’s mandate is limited to taxation. Like lottery, which is banned in some states but is still taxed in states where it is not banned.
How did the council decide on the issue of GST tribunals? You had said it will be done in phases.
For the first phase, there were a lot of proposals from the states and on the basis of those proposals, the council recommended setting up of the benches in the major state capitals and seat of high courts first. There are some smaller states, like northeast states for instance, which will have a common bench at Guwahati, and Sikkim, which will have a bench along with that of West Bengal at Kolkata. We will expand the benches to other locations as per need.
Our attempt is that the first phase will be done in four to six months.
Revenues have stabilised. Do you think there is room for wider GST rate structuring?
For that, there is the GoM on rate rationalisation which will consider it when it is reconstituted. Once it is constituted, I am sure all aspects will be discussed.
Direct and indirect tax revenues are doing well. Will collections exceed the budget estimates?
We are growing at 12% for GST, and direct tax is about 16%. We are down in excise by 11% because of some rate revisions in the first quarter last year. This is just one quarter and too early to revise the estimates based on these figures. We hope that we should be able to meet the targets that have been assigned to us. We should be happy if tax buoyancy is more than one.
Some of the liberalised remittance scheme (LRS) changes have been postponed to October. Will credit cards still be included once the system is ready?
Yes, it is postponed but this matter does not fall in my domain. It is DEA’s call depending on considerations of the practical difficulties in implementing it and also the convenience of the citizens or the users.
Angel tax continues to be an issue and now we have these notices going to MNCs. Any more measures on that?
We have taken action on three fronts. Firstly, for startups, from a recipient perspective, we have provided a certain degree of relief. Then from the giver’s perspective, also certain companies, which are owned by the government or sovereign funds etc., or those which are regulated like banks and insurance companies are exempt – so investment from regulated funds of certain countries. Thirdly, on valuation, we have given additional five methods. So, it’s a good balance.
We would like that, while we do not inconvenience the genuine investors, at the same time, those who are trying to bring in laundered money, we are able to restrict that. For notices, law will take its own course on the basis of the facts of each case.
