Online gaming industry calls 28% GST decision ‘industry killer’
GST Council held its 50th meeting on Tuesday. Photo: Twitter/FinMinIndia
The GST council held its 50th meeting on July 11, agreeing to a slew of new proposals that will make certain items and services cheaper and others costlier. Two announcements have especially caught the attention of the general public, social media, and the opposition.
GST on online gaming, horse racing, and casinos
- The GST council has decided to impose a jaw-dropping 28% tax on the full face value of the revenue generated on online gaming, horse racing, and casinos.
- This decision has not gone down well with the country's $1.5 billion online gaming industry, with leaders calling it an "industry killer".
- Ashneer Grover, who recently announced his latest venture with a cricket betting app, said, "RIP - Real money gaming industry in India."
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…
— Ashneer Grover (@Ashneer_Grover) July 11, 2023
- Roland Landers, CEO of The All India Gaming Federation, called it "unconstitutional, irrational, and egregious".
- Others said the decision will hamper foreign direct investment in the online gaming industry.
- Online gaming has been booming in India, giving birth to new startups. The online gaming industry is still poorly regulated but generates a high turnover.
- Some of the Indian gaming startups like Dream 11 and Mobile Premier League are backed by foreign investors such as Tiger Global and Sequoia Capital.
How will 28% GST impact players?
A Twitter user explained it this way:
The current gst proposal on Online Gaming can be best summarized as under:
— n jayakumar (@jakesprime) July 11, 2023
Post this rule change, lets say A and B were both dumb enough to want to invest 100 rupees each in a real money head to head game.
Like the modern Indian rope trick - the moment you invest 100,
- Since the GST is applied on the entry fees and the winning amount both, the moment the user invests their money, say Rs 100, the 28% GST plus platform chargers are applied.
- And then if the winner makes any kind of money, GST and TDS will be charged on it too.
Justifying the GST levied on online gaming, casinos, and horse racing, Union Finance Minister Nirmala Sitharaman said it needs to be higher than the GST levied on essential items.
Finance minister explanation of why 28% GST on casinos, online gaming and races was applied after due deliberation within GST council.
— Amit Kumar Gupta (@amitgupta0310) July 11, 2023
"Rates on gaming can't be less than on food items" pic.twitter.com/PZPWRHDsfC
GSTN under PMLA
- The Central government has decided to bring the GST Network (GSTN) under the purview of the Prevention of Money Laundering Act (PMLA).
The Prevention of Money Laundering Act (PMLA) has nothing to do with GST Law. The notification to bring GSTN information under PMLA will empower our agencies with more information on tax evasion which they were not getting earlier: Sanjay Malhotra, Revenue Secretary pic.twitter.com/SuPDRPX7y5
— ANI (@ANI) July 11, 2023
- However, this decision was met with opposition from the finance ministers of states such as Delhi and Punjab, who claimed that sharing GSTN information with the ED and other investigative agencies will allow the government to target traders and businesspersons in opposition-ruled states.
#WATCH | After the 50th GST Council meeting, Delhi Minister Atishi says, "A very important was raised by several Finance Ministers, including that of Delhi - why GST has been brought under PMLA. A gazette was issued on 7th July as per which the entire GST system was brought under… pic.twitter.com/pGkUxah4XA
— ANI (@ANI) July 11, 2023
The things that will get cheaper
- GST on food in cinema halls will be decreased from the current 18% to 5%.
- However, some explain that this change is only applicable if moviegoers buy food at the counters and not while booking their tickets itself.
- GST council has recommended to decreased the tax rate on "uncooked, unfried and extruded snack palettes, fish soluble paste, LD slag to be at par with blast furnace slag, and imitation zari thread" from 18% to 5%.
GST Council approves rate reduction on 4 items:
— Nirmala Sitharaman Office (@nsitharamanoffc) July 11, 2023
✅Uncooked, unfried & extruded snack palettes brought down from 18 to 5 %
✅Fish soluble paste brought down from 18 to 5%
✅LD slag to be at par with blast furnace slag. It has been changed from 18 to 5%
✅Imitation zari thread… pic.twitter.com/3ItYYQRJUS
- The council has also recommended GST exemption on cancer-related drugs, medicines for rare diseases and food products for special medical purposes.
- GST exemption has also been recommended on satellite launch services provided by private organisations.