The Goods and Services Tax (GST) Council finally made a decision on a years-long debate on how online gaming companies and casinos should be treated when it comes to taxes. The decision was confirmed at the 50th GST meeting on the 11th of July when the council chose to impose a 28% tax on online gaming, horse racing and casinos.
The government plans to facilitate this further by bringing in a legal amendment during this monsoon session. In any case, the 28% tax will apply to the full face value of the bets placed on online gaming, casino games, and horse racing.
Will the New GST Gambling Tax Hurt the Industry?
According to Finance Minister Nirmala Sitharaman, the new tax is not meant to hurt the industry, but it was simply the way in which the council answered the question of whether the industry can be given greater encouragement compared to essential goods. He also said that the new tax will improve transparency and remove complexities from an unclear tax law that was in power until now.
How Will This Decision Affect the Industry?
While the new tax might not kill the online gambling industry, as some suggested, it will certainly have big effects on it. First of all, the tax represents an increased cost for gaming companies, which might lead to higher prices for players.
Furthermore, it will reduce competition with smaller companies likely being unable to compete with increased costs. It may also hinder innovation as companies won’t have as much money to invest in innovation.
Finally, this tax could lead some consumers to play at offshore gambling platforms, which aren’t subject to the GST and that could hurt the domestic gaming industry in India.
On the bright side, it will lead to increased regulation, with the possibility of stricter rules and regulations to follow.
How Did the Online Gaming Industry React to the New Tax?
The online gaming industry requested that the GST council and the government charge 18% GST instead of the 28% recommended by the Group of Ministers.