Sanjana B, Pune
Finance Minister Nirmala Sitharaman, in the 51st Goods Service Tax (GST) meeting, announced a 28 % tax on all forms of online betting starting October 1. The meeting, held on August 2, concluded with the approval of a review of this imposition.
The decision was initially announced on July 11 during the 50th GST Council meeting. The Finance Minister had brought up the argument of morality and questioned if the gaming industry needed more endorsement than essential goods. The previous tax amount stood at 18% on gross gaming revenue (GGR), the profits generated from players’ losses. Now, even these gaming companies will be taxed on entry fees and other miscellaneous charges. Mrs. Sitharaman said that the decision came after appeals from Delhi, Goa, and Sikkim to review the tax quota. The council said they will review the 28% quota six months after its implementation. Horse racing, online gaming, and casinos are all in the category of gaming.
Several Amendments surrounding the GST laws were made during the meeting. The CGST Act 2017 (to make a provision for the levy and collection of tax on intra-State supply of goods and services) and the IGST Act 2017 (which allows businesses to claim an input tax credit (ITC) on the IGST paid for interstate purchases) were amended.
The Council also suggested a specific provision be added to the IGST Act for suppliers outside India to pay taxes on their online gambling to Indian citizens. The council also sought to block access to public information if the supplier failed to comply with provisions of registration or tax payment. For the CGST Rules, the council proposed that the valuation be based on the amount deposited by the player, excluding any previous winnings used for bets.
Revenue Secretary Sanjay Malhotra said that taxing online gaming does not imply legalisation of betting and gambling in states that have banned them. The Indian gaming industry was estimated to be worth around $ 2.8 billion in FY22.
The Federation of Indian Fantasy Sports (FIFS) and E-Gaming Federation (EGF), representing 50 Indian online gaming companies, said the new tax framework would lead to a 350% increase in GST, costing the Indian online gaming industry a huge loss. Both organisations expressed concern over decreasing volumes with a tax increase, which could force users to join illegal betting platforms and discourage investors from funding local gaming companies.