– Akshara Bharat
In the complex maze that goods and services tax (VAT) has now become, the powers that determine the fate of this instrument have created in their infinite wisdom a unique category. It’s called Casino, Lottery, Horse Racing and Online gaming† In one fell swoop, a modern hangar now houses both jet aircraft and bullock carts.
Casino and its various forms represent gambling, an enterprise as old as the bullock cart. Casino and lotteries are widely recognized as a game of chance – where luck plays a predominant role in determining the winner.
Online gaming, on the other hand, is a modern phenomenon, played on PCs, consoles and mobile. In its competitive form, it is called esports. It is a medal event in the Asian Games and the professional competitions draw an audience of hundreds of millions. Skill, talent and knowledge are the main factors that determine the winners in online gaming.
Should the hangar now be home to jets, bullock carts and horse-drawn carriages? By clubbing casino, lottery and online gaming, the GST committee has not only done the booming online gaming industry a great disservice, but has also created a lot of confusion.
The Honorable Minister of Finance Nirmala Sitharaman itself seems confused. In the press conference on June 30, she said: “Whether it’s horse racing, online gaming or casinos, the common thread that the committee put forward is that they are part of betting and gambling … In other words, they are essentially gambling. There can be an element of skill in it or an element of chance. But essentially all three are gambling,”
This is a colossal misunderstanding that could derail India’s progress towards a gaming superpower. The Honorable Prime Minister Narendra Modi has himself recognized the potential of the online gaming industry and has said that India has the potential to become the global leader in the digital gaming sector. The online gaming industry has recently emerged thanks to technological innovation and the growing penetration of smartphones and the internet. According to the All India Gaming Federation, it has a potential to create about 60,000 highly skilled jobs and attract more than Rs. 20,000 crores in FDI in the coming years. A KPMG report said the Indian online gaming industry was worth Rs 13,600 crore in FY 2020-21 and is likely to reach Rs 29,000 crore in FY 2025
The Hon’ble Finance Minister himself in the last Union budget announced the creation of the AVGC Promotion Task Force to look at ways to build domestic capacity as well as meet global demand in the animation, visual effects, gaming and comics (AVGC) industries. G (Gaming) is an important letter in the term AVGC and probably has the most potential of the four sectors.
Several court decisions from both High Courts and Supreme Court of India have clearly outlined the difference between games of skill and games of chance. The GST commission by clubbing casinos and lotteries along with online gaming has created new confusion. It is time to clear the air about this and to treat the games of chance (Casino & lottery) differently from Games of Skill (online gaming).
There are global examples that India can learn from. In Denmark, casinos pay anywhere from 45% to 75% of their gross gaming revenue (GGR). The tax system for online games is different. It is only 20% of the BGR. In Germany, the GST on online games is only 19% of the GGR, while casinos pay 90%.
In formulating the new GST principles, there is one element that India should pay attention to and remove it from the system. There is an explosion of foreign gambling companies parading their wares in India. They run illegal online casinos and betting, ensnare millions of unsuspecting citizens of India and rob millions of rupees from the Indian treasury. They are the ones who will rejoice when India decides to house gambling and online gaming together in the same hangar. They are the ones who will prosper and prosper as the domestic online gaming industry dies
The Indian online gaming industry is not just the equivalent of jet aircraft. It is a rocket ship that can truly fulfill India’s true potential as the gaming powerhouse of the world.
(Akshara Bharat is an analyst at Policy Matrix, a policy consultancy and research firm)