India Ministry To Ask For Review Of Tax On Online Volume

July 18, 2023
The Indian ministry overseeing development of the online gaming industry will ask the country’s tax council to review a potentially fatal 28 percent goods and services tax (GST) on gaming operator volume amid industry dismay at the decision.


The Indian ministry overseeing development of the online gaming industry will ask the country’s tax council to review a potentially fatal 28 percent goods and services tax (GST) on gaming operator volume amid industry dismay at the decision.

Minister of state Rajeev Chandrasekhar said on Monday (July 17) that the Ministry of Electronics and Information Technology (MeitY) will ask for a review of the decision while reminding the audience that the council “is not the Government of India”.

The online gaming industry is going through a teething process in which the processes of taxation and gaming regulation need to be aligned, Chandrasekhar said.

He told a CNN-News18 town hall presentation that three years of tax debate between the central government and state governments have created a comprehensive GST framework, but the regulatory framework specific to online gaming has only been in development for six months.

“And while we may quibble with what [the GST Council] have found and what they have not done — and the industry seems to be unhappy with it — we have to also recognise that the process of creating a regulatory framework for online gaming only started in January of 2023,” he said.

“And we are only in the early stages, the nascent 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 [of the tax] on the facts of the new regulatory framework.”

Chandrasekhar’s comments follow industry warnings of calamity for the sector, dissent from the GST Council’s Goa state delegate on the volume tax and warnings from Karnataka state’s information technology minister of heavy disruption of foreign direct investment and to India’s digital economy policy.

Chandrasekhar waved away potential litigation over the GST Council decision based on constitutional distinctions between skill and chance games, instead arguing that a solution to industry unease will be found in policy compromise.

“I hear the noise and I hear some people saying it’s anti-constitutional and x, y and z,” he said. “Sorry to say this, but they’re totally certainly wrong.”

“I think it is better to slowly progress and evolve these frameworks that are sustainable than doing things in a hurry just because you’re reacting to a soundbite or to an angry industry, or an angry start-up, and then create downstream mistakes,” Chandrasekhar said.

The minister of state has come under criticism in recent months for failing to clarify the legality of online skill games, and whether bans on betting and wagering in the government’s online gaming rules apply to them.

On Monday, Chandrasekhar followed a similar road, talking of processes toward outcomes rather than the content of the processes or the outcomes themselves.

“We believe today, and the Prime Minister is very clear: in the digital space, do everything from the perspective of the next decade. So the laws, the rules, all go through detailed, deep consultation with the stakeholders and then we get people on board.

“The online gaming rules that have come out went through almost three-and-a-half months of consultation and I want to tell you that what the government started with and what we ended with were totally different as a consequence of consultation.

“So, it’s better to do it right than to do it fast,” he said.

In a similar marriage of ambiguity and purported clarity, Chandrasekhar said on Twitter on Tuesday that reports on MeitY’s views on the GST Council decision should be “clearly understood”.

“After the nascent and evolving regulatory framework around the online gaming rules that define permissible online games develops … then we will communicate [the] new framework to [the] GST Council and [request] them to consider this new framework.”

Chandrasekhar did not offer a timeline for this process.

But the industry may not have much time in any case, given that central government revenue secretary Sanjay Malhotra said on July 12 that tax authorities will continue to demand years of unpaid GST from operators, thereby ignoring state high court rulings favouring the industry.

The central government has appealed the most important of these decisions — Karnataka High Court voiding a tax authority claim for billions of dollars from online skill game operator Gameskraft — to the Supreme Court.

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