The recent decision by the GST Council to tax online gaming at par with lottery and gambling has sparked controversy and criticism. This Representation by CAIT delves into the catastrophic implications of this change, including its impact on the online gaming industry, employment, and offshore competition. It highlights the inconsistencies with the government’s efforts to regulate and grow the sector, and calls for a review of the decision to protect the Indian Online Gaming industry.
The decision by the GST Council imposes a tax burden that undermines the financial model of online skill-gaming companies. Taxing the full face value instead of the margin goes against years of settled jurisprudence distinguishing games of skill from games of chance. This move makes the industry financially unviable and threatens significant job losses as companies struggle to accommodate the excessive tax burden.
Furthermore, the heavy tax burden will likely drive Indian users towards offshore gaming companies that offer more attractive winnings. These offshore companies operate outside Indian laws, evading taxes and resulting in revenue loss for the government. The decision by the GST Council contradicts the government’s efforts to regulate and promote responsible gaming, as demonstrated by the Ministry of Electronics and Information Technology’s establishment of rules and self-regulatory bodies.
The decision of the GST Council to tax online gaming at 28% of the full value of deposits has far-reaching catastrophic implications. It threatens the sustainability of the industry, job security, and drives business towards offshore gambling platforms. The decision stands in contrast to the government’s initiatives to regulate and grow the online gaming sector, making it imperative for a review to protect the Indian industry. Confederation of All India Traders (CAIT) urges the Hon’ble Prime Minister of India to reconsider the decision and safeguard the interests of the online gaming industry.
Text if their representation is as given below:-
Confederation of All India Traders
(An Apex Body of Trade Federations, Associations & Non-Corporate Sector of India)
“Vyapar Bhawan
925/1, Naiwala, Karol Bagh, New Delhi-110005.
Phone: +91-11-45032664, Telefax +91-11-4503265
E-mail: teamcait@gmail.com Website: www.cait.in
Ref. No.: 3605/1/50 Dated: 14th July 2023
Shri Narendra Modi
Hon’ble Prime Minister
Government of India
New Delhi
Respected Shri Pradhanmantri Ji,
In Re: Catastrophic implications of the change in GST on online gaming pursuant to the 50th GST Council meeting on 11th July 2023
1. We write on behalf of the Confederation of All India Traders (CAIT), the apex representative body of the trading community in India. We are writing to draw your attention to the recent catastrophic announcement in relation to online gaming by the 50th GST Council pursuant to its meeting on 11 July 2023, under which GST will be levied at the rate of 28% on the full face value for online skill-gaming companies.
2. We humbly submit that the decision undermines the financial model of online skill-gaming companies, and imposes a tax burden that is contrary to common sense and far excessive in We respectfully also state that the imposition of GST on the full face value ostensibly to bring online skill-gaming at par with casinos negates over 60 years of settled jurisprudence of the Hon’ble Supreme Court of India, which distinguishes games of skill from games of chance.
Catastrophic impact on employment
3. It is our humble submission that the levy of GST on the full face value will make the online skill-gaming industry unviable to operate, as tax will now have to be submitted on deposits that are not in the nature of revenue. This will make the industry financially unviable, and will lead to massive job losses as companies will be forced to either close down or significantly reduce their workforce to accommodate the inordinate tax burden on them.
Consequential rise in offshore companies leading to revenue loss
4. We also submit that the heavy tax burden will push Indian users to approach offshore gaming companies that will offer more lucrative winnings. We submit that such offshore companies are not subject to Indian laws, and do not deposit any taxes, even while earning significant revenue from Indian users. We kindly draw your attention to one such offshore company that is already openly and actively advertising its non-compliance with Indian laws, such as GST and TDS.
GST Council’s decision an aberration on online gaming’s regulation
5. We truly believe that the GST Council’s decision is an aberration, and does not reflect the Hon’ble Government of India’s (Gol) efforts to promote and regulate online gaming. The Hon’ble Gol had earlier this year notified the Ministry of Electronics and Information Technology (MeitY) as the nodal ministry for online skill-gaming. The MeitY had since then introduce rules for online gaming, including the setting up of self-regulatory bodies and game-wise certification.
6. In light of the above, we urge your Hon’ble self to take cognizance of this aberration, which is contrary to the Hon’ble GoI’s continuous positive efforts to promote responsible gaming in We implore you to reevaluate the GST Council’s decision, and revoke the grave lapse in its decision.
7. We will remain truly grateful for your kind consideration.
Thank you. With kind regards
Truly yours
Praveen Khandelwal
National Secretary General
Confederation of All India Traders
Copy to:
1. Smt. Nirmala Sitharaman, Hon’ble Minister of Finance, Ministry of Finance, Government of India
2. Sh. Rajeev Chandrasekhar, Hon’ble MoS, McitY, Government of India
