The 50th meeting of the Goods and Services Tax (GST) Council was held on July 11, 2023  under the chairpersonship of the Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman.

The GST Council has deliberated on the issues and has recommended the following:

• Suitable amendments to be made to law to include online gaming and horse racing in schedule III as taxable actionable
• All three namely Casino, Horse Racing and Online gaming to be taxed at the uniform rate of 28%.
• Tax will be applicable on the face value of the chips purchased in the case of casinos, on the full value of the bets placed with bookmaker/totalisator in the case of Horse Racing and on the full value of the bets placed in case of Online

Considerations relating to taxation on casinos, horse racing and online gaming started before the 47th GST Council meeting ie. Around 3 years back, the Group of Ministers (GoM) submitted its first report in the 47th GST Council meeting. It was decided to relook the issue once again. The GoM submitted its second report and it was placed before the 50th GST Council meeting. The GoM, in its second report, had recommended that since no consensus could be reached on whether the activities of online gaming, horse racing and casinos should be taxed at 28% on the full-face value of bets placed or on the GGR ie., Gross Gaming Revenue, the GST Council may decide. The GST council has recommended a uniform rate of tax @28% on the full face value.

The decision to levy GST on turnover is expected to boost revenue collection to almost 10 times. It is also believed that this will help to regulate the online gaming industry and ensure that it is fair and transparent. The uniform rate clearly shows that the Government has decided to smash the distinction of “game of skill” and “game of chance”. Presently games of skill such as cards, puzzles etc., attracts 18% GST on the total GGR & game of chance ie., gambling, casino includes 28% GST, along with this TDS of 30% on net winning. Whereas the recent recommendation suggests a flat rate of 28% will apply on both along with TDS.

Some have welcomed the decision with a view that these kinds of games may lead to addiction which is detrimental to society. Increasing the GST can make these activities costlier, which inturn leads to lesser participation. Also supporters of this decision are the traditional gaming companies, who have the opinion that it will be a level playing field between online gaming companies and traditional gaming companies.

The online gaming market is growing rapidly at US$ 3 billion. It is growing at a compounded annual growth rate (CAGR) of around 30%. Finance Minister Nirmala Sitharaman said in a press conference that “It was a decision (28 per cent GST on online gaming, casinos & horse racing) more from a moral point of view. Killing an industry (online gaming) is not on our agenda. The focus is to have a simplified system,”

While the Government has decided to move on with the uniform rate of GST, most of them in the industry are criticising the decision. They feel that this taxation will discourage players. Also such high taxation will impact the livelihood of gamers. Higher GST rates will also lower the playable value received by the platform users. Additionally, online gaming platforms will find their profit margins squeezed.

Roland Landers, CEO, The All India Gaming Federation reported to a popular newspaper interview “We believe this decision by the GST Council is unconstitutional, irrational, and egregious. The decision ignores over 60 years of settled legal jurisprudence and lumps online skill gaming with gambling activities. This decision will wipe out the entire Indian gaming industry  and  lead  to lakhs of Job losses and the only people benefitting from this will be anti-national illegal offshore platforms”.

Few experts of the industry also feel that The tax levy would mostly lead users to look out for offshore or illegitimate platforms which do not charge GST. This would cause the industry dearly and could prove disadvantageous as well. This could as well have several negative consequences, including loss of revenue for the Government.

In most countries the online gaming industry is more or less on par with the current GST of 18%. It will surely be disadvantageous if the tax rates move to 28%.   This may lead to an increase in illegitimate foreign gaming platforms to attract gamers.

Shark Tank India judge, Bhartpe Founder Ashneer Grover has tweeted “RIP

– Real money gaming industry in India. If the govt is thinking people will put in ₹100 to play on ₹72 pot entry (28% Gross GST); and if they win ₹54 (after platform fees)- they will pay 30% TDS on that – for which they will get free swimming pool in their living room come the first monsoon – not happening ! It was good fun being part of the fantasy gaming industry – which stands murdered now. $10 Bn down the drain in this monsoon. Time for startups Founders to enter politics and be represented – or this is going to be spate industry after industry.”

Soon after the new tax was announced, the listed companies like Nazara Technologies, Delta Corp, a gaming and hospitality firm that owns and operates casinos, took a tumble on the BSE. upon that the worst hit were the smaller companies.

Well, in spite of all the for and against arguments, the Government as a protector of the society, has caught two birds with one stone, it has targeted to increase the revenue and also a step to change social behaviour. We have seen many instances where these gambling destroys lives and families. However it is better for the Government to revisit the decision and come back with much more certainty.