79% of citizens want the GST on online games, casinos and horse odds to be 28% or more
The GST advice composed of a group of ministers, headed by Meghalaya Chief Minister Congrad Sangmaagreed to recommend increasing the rate of GST on casino, racetrack and online gaming services to 28%, which is however subject to final approval by the GST Board.
The panel of ministers also decided that the tax will be levied on the full “face value” or “bet amount” and not the full value of the transaction. The total value of the transaction includes the prize money or the net commissions (revenues) that accrue to the gaming companies. These recommendations will be sent to the Goods and Services Tax (GST) Board for approval. However, the online gambling industry that operates skill-based games like esports, rummy, poker, chess and fantasy games has been pushing for the GST to be capped at less than 18%. They had backed the claim, saying a move to the top tax bracket would derail the $2.2 billion industry which has 400 players and employs about 45,000 people.
On the taxation of online games, casinos and horse racing, 45% of citizens are in favor of a GST of 28% on this leisure activity. Meanwhile, 7% of respondents voted for a 40% tax bracket, 27% voted for more than 50%. Only one percent of respondents felt that online gaming, casinos and horse racing should be exempt from GST, while six percent had no opinion on it. This survey question received 12,097 responses.
With more and more fantasy gaming mobile apps and websites emerging as significant players in the online gaming and sports entertainment industry, the position of the law regarding the legality of online fantasy gaming is an important aspect of gaming law in contemporary times. One of the most crucial parameters in determining the legality of online fantasy games is whether such a game is primarily a “game of skill” or a “game of chance”.
In the absence of a unified gambling code, different courts have taken differing views on how to deal with online gambling. With few exceptions, games of skill when played for stakes are excluded from gambling bans in most states of India.
Courts in some states such as Tamil Nadu, Kerala and Karnataka have ruled that online fantasy games involve substantial skill, which is nothing but commercial activity, and therefore protected under the Article 19 of the Constitution, but some states such as Assam, Sikkim, Nagaland, Odisha, Telangana and Andhra Pradesh have continued to ban these online fantasy games.
“”International experience in the field of skill games suggests that the indirect tax is usually levied on the gross gaming revenue or commission fee which is nothing but the revenue generated by the gaming operators. If the platform offers a game of chance characterized as a bet or game, then the tax is applied to the entry fee or the bet. Now, with GoM’s proposed convergence of the GST rate to 28% for online games, it will be interesting to see how rating mechanisms would be prescribed for skill-based games. games,” said Hardik Gandhi, Partner, Deloitte Haskins & Sells LLP.
It is expected that, in accordance with international practice, the value of online games will be the gross gaming revenue or rake fees (platform fees) and not the entry amount or stake.
“It is feared that charging GST on entry fees or wagering will mean that operators will eventually have to pass the higher burden of GST onto players. In such a scenario, player winnings could be squeezed and could be discouraged. Therefore, this may impact volumes, overall economic value and may also affect compliance behavior,” Gandhi added.
The GST authorities, meanwhile, have issued notices to various industry players, offering to recover the additional GST due to the dispute over the assessment.
“A centralized regulatory body or framework to oversee the online gambling industry would help ensure uniformity in law enforcement across all states. Such a self-regulatory body would also help inspire more innovation and to ensure a level playing field for all platforms. Resolving the legal ambiguities that continue to persist in this industry as well as a fair and reasonable rate of GST is the need of the hour. Greater clarity for the industry will undoubtedly pave the way for greater investor confidence and, more importantly, improving India’s reputation for Doing business in India,” according to Adarsh Somani (partner) and Sahil Kothari ( Senior Partner) at Economic Laws Practice.
And as with online gambling, 60% of citizens want the GST rate on cryptocurrencies to be 28% or higher. The GST board is also considering a similar 28% tax on cryptocurrencies.
More than seven out of 10 citizens are opposed to an increase in the goods and services tax (GST) from 5% to 7-8% and from 18% to 20%. The survey received over 34,000 responses from citizens in 319 districts of India.
“Given high inflation and 7 out of 10 households in the country facing pressure, any change in the rate structure from 5% to 7-8% will have a direct impact on household budgets and, therefore, the majority of consumer households are explicitly against such Similarly, in the case of services according to people, the 18% GST rate leads to high tax evasion where most small and even medium-sized entrepreneurs do not issue an invoice GST bills and accept payments in cash or to family members’ bank accounts By increasing the service tax from 18% to 20%, there is a high risk that most people will probably avoid GST bills largely only letting businesses pay the top rate of 20%,” the survey said.
Seventy-one percent of respondents were also against increasing the GST on household items such as shampoo, hair oil, toothpaste, etc.
The majority of households are instead seeking relief from GST rates given high levels of inflation, with 70% reporting a more than 10% increase in monthly costs in May.