In the complex maze that the Goods and Services Tax (GST) has become today, the powers that decide the fate of this instrument, have in their infinite wisdom created a unique category. It’s called Casino, Lottery, Horse Racing and Online games. Suddenly, a modern hangar now houses jet planes as well as bullock carts.
The casino and its various forms represent gambling, an enterprise as old as the ox cart. Casino and lotteries are universally recognized as a game of chance – where luck plays a predominant role in choosing the winner.
Online gaming, on the other hand, is a modern phenomenon, played on PC, consoles and mobiles. In its competitive form, it’s called esports. It is an Asian Games medal-winning event and its professional leagues attract audiences in the hundreds of millions. Skill, talent and knowledge are the main factors that decide winners in online games.
Should the hangar now house jets, oxcarts and horse-drawn carriages? By bludgeoning casinos, lotteries and online gambling, the GST committee has not only done a huge disservice to the burgeoning online gambling industry, but has also created a lot of confusion.
The Honorable Minister of Finance Nirmala Sitharaman herself looks confused. At the June 30 press conference, she said “Whether it’s horse racing or online gambling or casinos, the common thread that the Committee has highlighted is that they are among the bets and games… In other words, they are essentially gambling. There may be an element of skill or an element of chance. But basically, all three are playing,”
This is a colossal misunderstanding and one that can derail India’s progress towards becoming a gambling superpower. Honorable Prime Minister Narendra Modi himself has recognized the potential of the online gambling industry and said that India has the potential to lead the world in the digital games sector. The online gambling industry has emerged recently thanks to technological innovation and the increasing penetration of smartphones and the Internet. According to the All India Gaming Federation, it has the potential to create around 60,000 highly skilled jobs and attract over Rs. 20,000 crore in FDI in the next few years. A report by KPMG said that the Indian online gaming industry was worth Rs 13,600 crore in FY 2020-21 and is expected to reach Rs 29,000 crore by FY 2025.
The Honorable Minister of Finance herself in the last Union budget announced the establishment of the AVGC Promotion Working Group to examine ways to build national capacity and also to meet global demand in the Animation, Visual Effects, Games and Comics (AVGC) industry ). G (Gaming) is an important letter in the term AVGC and the one with probably the most potential of the four sectors.
Various court decisions from the High Courts as well as the Supreme Court of India have clearly defined the difference between games of skill and games of chance. The GST committee by bludgeoning casinos and lotteries with online gambling, has created further confusion. It is time to clarify the situation and treat games of chance (casino and lottery) separately from games of skill (online games).
There are global examples that India can learn from. In Denmark, casinos pay between 45% and 75% of their gross gaming revenue (GGR). The taxation system for online games is different. It’s just 20% of the GGR. In Germany, the GST on online games is only 19% of the GGR, while casinos pay 90%.
While formulating the new GST principles, there is one element that India needs to watch out for and eliminate from the system. There has been a proliferation of foreign game companies parading their wares in India. They run illegal online casinos and betting operations, ensnaring millions of unsuspecting Indian citizens and stealing millions of rupees from the Indian treasury. They are the ones rejoicing as India decides to bring gambling and online gambling together in the same shed. They are the ones who will prosper and prosper if the domestic online gaming industry withers
India’s online gaming industry is not just the equivalent of jet planes. It is a rocket that can truly realize India’s true potential as a global gaming powerhouse.
(Akshara Bharat is an analyst at Policy Matrix, a policy research and advisory firm)