In its 50th meeting on July 11, the Goods and Services Tax (GST) Council decided to levy a uniform 28 per cent tax for bets placed in online gaming, casinos and horse-racing.
How it will work
The 28 per cent tax would be levied on the full face value of 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 gaming.
It will be imposed without making any differentiation on whether the games required skill or were based on chance.
Motive
The Council’s aim is to combat addiction to online gaming, something which young people are vulnerable to.
It has said that it does not intend to hurt the industry, but is considering the “moral question” about taxing both gaming at the same rate as other “essential items”.
“Our agenda is not to end any industry… all types of businesses have to function… there was discussion on the moral question that on one front, you do not want to end an industry.
But that does not mean that you give more incentives to them than essential goods… all states participated in this decision which has been pending for the last 2-3 years.
We could take the decision because every state clearly participated in it,” Sitharaman said.
Who is affected?
The decision applies indiscriminately to gaming and gambling platforms.
This includes companies that have spent years to convince the authorities to recognise them as separate from gambling platforms.
Industry raises concerns
Online gaming companies have raised concerns about the impact of this move on the industry.
The All India Gaming Federation (AIGF), which represents companies like Nazara, GamesKraft, Zupee and Winzo, said the decision by the 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,” AIGF CEO Roland Landers said.
Loss of revenue and encouraging move to illegal platforms
Joy Bhattacharjya, DG of the Federation of India Fantasy Sports (FIFS) said that the government’s move will lead to loss of employment for lakhs of skilled engineers.
It will also lead to users shifting to illegal betting platforms, leading to user risk and loss of revenue for the government.
“Needless to add, this decision will have a chilling effect on the $2.5 Bn of FDI already invested by investors and jeopardise potentially any further FDI in the sector.
Further, this decision will shift users to illegal betting platforms, leading to user risk and loss of revenue for the government.
We humbly request the GST Council and the Government of India to reconsider this decision,” Bhattacharjya said.
