Union MoS IT Rajeev Chandrasekhar Says Govt. May Ask GST Council to Reconsider Decision, GST Amendment Bill Misses Parliament Monsoon Session Agenda

At its 50th meeting, the GST Council ignited controversy by imposing a 28% tax on India’s online gaming, casinos, and horse racing sectors. This unexpected decision, based on the full face value of bets placed or contest entry amounts, has sent shockwaves through the gaming industry. Union Minister of State for IT, Rajeev Chandrasekhar has voiced his support for the Council’s move, which he claimed resulted from three years of careful deliberation.

Amid the outcry, there’s a glimmer of hope as Chandrasekhar indicated that the government may request the GST Council to reconsider its decision in light of recent regulatory developments in the gaming sector. As the industry rallies against the decision, the looming 2024 General Election presents a unique challenge for the government – balancing their desire for higher tax revenue and not endorsing unregulated gaming against the potential impact on the burgeoning gaming industry.

The 50th GST Council Meeting & It’s Aftermath

At the 50th GST Council meeting on July 11, a 28% GST on India’s online gaming, casinos, and horse racing sectors was announced, causing consternation within the industry. This tax will be based on the full face value of bets or contest entry amounts.

Union Minister of State for IT, Rajeev Chandrasekhar, supports the decision, stating in a Zee News interview that it was “well-thought-out” and took three years to conclude.

Online gaming is an important segment, but #Wagering and games of chance have increased cases of #userharm and #MoneyLaundering. The #GSTCouncil's decision to levy taxes on #onlinegaming is a well-thought out preliminary measure.

After putting regulatory framework in place,… pic.twitter.com/rs6Is3OJuG

— Rajeev Chandrasekhar 🇮🇳 (@RajeevRC_X) July 13, 2023

However, Chandrasekhar also acknowledged during a CNN-News18 Townhall that the online gaming industry’s regulatory framework is in its infancy, having begun only in January 2023.

“We have to also recognize that the process of creating a regulatory framework for online gaming only started in January 2023. We are only in the early stages of creating a predictable, sustainable permissible online gaming framework. So, we will do that and we will go back to the GST Council and maybe request their consideration on the facts of the new regulatory framework,” Chandrasekhar said.

You can watch the interview below.

In an Express Adda session on Wednesday, July 19, Union Minister of State for IT, Rajeev Chandrasekhar, reaffirmed his views on online gaming during a conversation with Anant Goenka, the Executive Director of Indian Express.

Chandrasekhar emphasized that while the Ministry of Electronics and Information Technology (MeitY) can propose a reconsideration of the decision to the GST Council, the final say lies exclusively with the Council.

He drew attention to the common perception among states that online gaming is tantamount to traditional gambling, often leading to it being branded a “social evil.” He clarified how this sentiment serves as a roadblock to the growth and evolution of the sector.

Echoing India’s significant role in the digital world, Chandrasekhar stated, “We are the single largest presence on the global internet today.” He noted that India’s approach to devising a regulatory framework for online gaming is under global scrutiny, given its potential to shape the industry’s future.

You can watch the interview below.

While the GST Council seems firm on their decision, the enforcement could be delayed as the GST Amendment Bill hasn’t made it to the Parliament’s monsoon session agenda from July 20 to August 11.

The gaming industry and player community are actively advocating their stance to high-ranking government officials. Key industry players penned a letter to Finance Minister Nirmala Sitharaman, calling for reassessing the GST policy on online gaming.

Additionally, poker player Deep Patel publicly questioned the Council’s decision in an open letter to the Revenue Secretary.

The government’s intention appears to steer clear of promoting unregulated gaming and gambling while aiming for increased tax revenue from the sector.

As the 2024 General Election approaches, experts predict the government will grapple with balancing this decision. The 28% GST, enforced on the full face value of bets or entry amount, and supported by states seeking maximum gaming tax, could severely impact the booming gaming industry.

Implementation Delayed?

The enactment of the GST Council’s decision necessitates amendments to the respective GST Acts by the Union and state governments. Changing online gaming and horse racing’s status to taxable actionable claims requires changes to Schedule III of the CGST and SGST Acts. These amendments must be brought before and approved by the Parliament.

The crucial GST Amendment Bill was slated for discussion and approval during the Parliament’s monsoon session. However, recent updates indicate that the bill has not been included in the agenda for the session that commenced today, July 20, and is scheduled to conclude on August 11.

Industry & Players Lobby Against the Decision

According to the latest updates, various gaming bodies and company representatives are making efforts to engage with the government and request a reconsideration of the GST Council decision.

Here are some key moves:

> A group of 127 online gaming players, including All India Gaming Federation, WinZo, E-Gaming Federation, and Games 24X7, penned an open letter to the government stating that the decision could result in significant layoffs, affecting both direct and indirect jobs in the sector. They highlighted the industry’s potential to create over 5 lakh jobs by 2025, but warned that the decision could hinder this growth and harm India’s talented engineering workforce.

> The Confederation of All India Traders (CAIT), representing eight crore traders and over 40,000 trade associations, has urged Prime Minister Narendra Modi to intervene and reassess the GST Council decision.

CAIT’s National President B.C. Bhartia and Secretary General Praveen Khandelwal argued that the decision would have catastrophic consequences for the industry, rendering it unviable and resulting in widespread job losses. They emphasized that the decision contradicts the goals of Digital India and StartUp India, and called for the regulation and expansion of the thriving gaming sector.

> Representatives from real money gaming companies are seeking meetings with MoS IT Rajeev Chandrasekhar and Revenue Secretary Sanjay Malhotra.

> Investors like Tiger Global, DST Global, Alpha Wave Global, Matrix Partners India, TPG and Steadview Capital that have invested in gaming firms like Dream11, Mobile Premier League (MPL), Games 24×7 and Zupee, are planning to write to the government to share their concerns on the decision.

> Poker professional Deep Patel has penned an open letter to Revenue Secreary Sanjay Malhotra criticising the GST Council decision and questioning if gamers are to be labelled as “addicts” and gaming as “betting.”

Patel pointed out that many players earn their livelihood by gaming, and practiced poker and chess like any other sportsperson. He questioned and criticised Malhotra’s recent statements that 28% GST will have economic rationale because people will use the time to do more productive activities.

Will the Government Reconsider?

The GST Council remains steadfast in its decision to tax the gaming industry, as Union Finance Minister Nirmala Sitharaman stressed post-meeting. Sitharaman argued it’s only just to tax online gaming like essential goods and services due to the value and profit it generates. She explained that tracking platform fees for taxation would be unfeasible due to the impossibility of monitoring all players and bets.

Revenue Secretary Sanjay Malhotra, in a CNBC-TV18 interview, dismissed an early review of this decision. He underscored the moral and social considerations informing the decision and predicted a significant increase in tax collection post-new GST implementation.

Kerala’s Finance Minister, K N Balagopal, asserted that the state insisted on taxing the full value to benefit State Lotteries and prevent potential legal issues. The concern is that revoking this decision may spur the lottery industry and IPL franchises to demand reduced GST on their sectors.

The delay in the GST Amendment Bill discussion during Parliament’s monsoon session gives the gaming sector more time to present a compelling case to the GST Council.