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What's the article about?
- It talks about the decision of the GST Council to levy a uniform 28% tax on online gaming.
Relevance:
- GS3: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment;
- GS2: Government Policies and Interventions for Development in various sectors and Issues arising out of their Design and Implementation;
- Prelims
Context:
- The Goods and Services Tax (GST) Council, in its 50th meeting on Tuesday (July 11), decided to levy a uniform 28 per cent tax on full face value for online gaming, casinos and horse-racing.
- The government is now expected to bring in a legal amendment to facilitate this in the monsoon session of Parliament, which will enable inclusion of online gaming and horse racing under actionable claim and hence, facilitate taxation of these categories with no distinction for game of skill or chance.
- The said amendment will include online gaming and horse racing in Schedule III as taxable actionable claims.
- In the context of GST, an actionable claim is defined as goods under the Central Goods and Services Tax Act, 2017. It is a claim to an unsecured debt or a claim to any beneficial interest in movable property that is not in the possession of the claimant.
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Online gaming industry in India:
India's fantasy gaming industry has been growing rapidly in recent years, with a large user base and significant revenue. Here are some key points from the search results:
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Analysis:
Criticism by gaming companies:
- Online gaming companies said that the GST Council did not differentiate between game of chance and game of skill while setting a tax.
- In doing so, the Council has chosen to disregard the views of the courts which have distinguished between the two, recognising skill-based games as a legitimate business protected under Article 19(1)(g) of the Constitution.
- The courts have interpreted the term ‘betting and gambling’ to mean games of chance covered under the Public Gambling Act, 1867 or state gambling and betting laws.
- In the case of Gameskraft Technologies Pvt Limited versus the Directorate General of Goods & Services Tax Intelligence, for example, the Karnataka High Court observed there is a clear difference between games of skill and chance saying the latter should be treated “res extra commercium”, or something that is outside of commerce.
- Online gaming companies said that the new GST norms will limit their ability to invest in new games, impact cash flows and business expansion.
- The decision will be a major setback for the fantasy gaming industry, which was expected to cross Rs 25,000 crore in revenue by 2027.
Way Forward:
- The fantasy gaming industry in India is a rapidly growing market with a large user base and significant revenue. It has also created employment opportunities and contributed to the overall growth of the Indian economy. However, challenges like tax and morals need to be addressed.
