In a pivotal decision that has stirred debate and contention among states, the GST Council, chaired by Finance Minister Nirmala Sitharaman, announced a 28% tax on online gaming, casinos, and horse racing. The tax is slated to become effective on October 1, following the council meeting held on August 2, 2023.
GST Council Approves Levy Despite Dissenting Voices:
Several states, including Delhi, Goa, Sikkim, and Tamil Nadu, voiced specific reservations about the new levy. Delhi’s Minister Atishi called for the decision to be reviewed, while Goa and Sikkim expressed fears that the decision might adversely affect them. The opposition, however, did not halt the forward momentum of the plan.
Tamil Nadu’s Concerns Addressed:
Newly appointed Finance Minister Thangam Thennarasu of Tamil Nadu expressed apprehension that the new tax might undermine the state’s ban on online gaming. In response, Revenue Secretary Sanjay Malhotra indicated that an additional provision in the language of the decision could preserve existing state laws.
Industry Reaction Mixed:
While the online gaming industry welcomed the clarification that the tax would be levied on the entry amount and not winnings, concerns remain high. Industry groups such as the E Gaming Federation and Federation of Indian Fantasy Sports predict that the new framework will lead to a burdensome 350% increase in GST, potentially setting back the sector by years.
Review Scheduled after Six Months of Implementation:
Finance Minister Sitharaman provided assurance that the levy would be reviewed six months after its implementation, offering some solace to the concerned states and industry stakeholders.
Parliament to Amend GST Law:
The government is now focused on amending the Goods and Services Tax (GST) law during the current Parliament session. This move underscores the significant transformation in the taxation approach towards the rapidly growing online gaming industry in India.
This landmark decision, filled with both opportunities and challenges, reflects the intricate landscape of regulating and taxing an industry experiencing exponential growth. It emphasizes the importance of a cohesive approach, considering the varied interests of different states, the industry itself, and the broader legal framework, as India continues to navigate the complex world of online gaming.