State Government Dissenters Attack India Tax On Online Volume

July 14, 2023
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Cracks are quickly emerging in what India’s finance minister had called unanimous support for a goods and service tax (GST) on gaming volume, hinting at a regional push for the GST Council to review its decision that has rocked the industry.

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Cracks are quickly emerging in what India’s finance minister had called unanimous support for a goods and service tax (GST) on gaming volume, hinting at a regional push for the GST Council to review its decision that has rocked the industry.

Indian finance minister Nirmala Sitharaman on Tuesday (July 11) described the council’s decision to impose a 28 percent GST on volume for online operations, casinos and horseracing rather than gross gaming revenue (GGR) as “unanimous”.

But the council’s delegate from the land-based casino hub of Goa contradicted this on Wednesday, stating that the council had been close to supporting a tax on revenue until Uttar Pradesh state’s hardline delegate objected to it.

The Goa delegate, state transport minister Mauvin Godinho, told reporters that consensus had “almost been reached” on taxing GGR when Uttar Pradesh finance minister Suresh Kumar Khanna objected.

The debate then unravelled and the council settled for a volume tax, Godinho said.

“That’s how they decided on the full face value [gaming volume] as well as on the 28 percent [rate],” he said.

Godinho’s dissent likely confirms industry concerns that the GST Council did not take its consultations and equity analyst contributions seriously over months of delayed deliberations on the tax.

“Everyone in the industry — casinos, online gaming or horseracing — wanted the entire calculation to be done on gross gaming revenue for the purposes of taxation,” he said.

“[At] 28 percent … there was no dispute,” he said. “But, they decided on the full face value.

“I feel it is going to be a very negative factor for the industry and hamper fresh investment. It will hamper the existing industry, [as] footfall is bound to decrease,” Godinho said.

Central government revenue secretary Sanjay Malhotra on Wednesday compounded industry concerns when he said the council’s decision was merely a confirmation of existing practice, rather than a decision establishing new GST parameters.

That approach would immediately threaten gaming operations across all segments if the tax authorities choose to ignore several court rulings against them, including a High Court ruling appealed to the Supreme Court, and continue issuing demands for overdue GST payments.

Godinho said Goa Chief Minister Pramod Sawant has indicated he will pursue the matter with the central government.

“It will ultimately go for reconsideration to the [GST] Council — [the tax] has to go,” he said.

“If there is a representation from our government — and it will be there — I have told the chief minister to write to the finance minister as well as others. I think other representations from other industries are bound to come.”

Karnataka state’s information technology (IT) minister on Thursday (July 13) added to the Goa dissent by attacking the GST Council’s decision to tax gaming volume, warning the move threatens India’s digital economy ambitions.

Priyank Kharge told reporters that the decision should be reviewed to defend the “Indian gaming startup ecosystem”, which would suffer significant losses in foreign direct investment.

Kharge is not Karnataka’s GST Council delegate and it was not immediately clear what position the state’s council member, revenue minister Krishna Byre Gowda, took on the volume tax.

Karnataka’s capital city Bangalore is an IT hub with an ambition to be India’s “champion state” for start-ups, according to a six-year policy that began last year.

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