The 50th GST Council meeting decided to impose a 28% tax on online gaming, including casinos and horse racing.
The objective was not to harm the industry but to address the moral question of providing greater encouragement to non-essential goods compared to the gaming industry.
The aim of the decision was to simplify the taxation process, eliminate complexity, and promote transparency.
Under the new taxation scheme, online gaming platforms will be taxed at 28% on the full-face value of the placed bets.
Previously, the gross gaming revenue (GGR) was taxed at 18%, but now the tax will be levied on the entry bet at 28%.
This change will reduce the available resources for the prize pool and pose a disincentive for the industry, considering the existing 30% taxation on users' final winnings.
Industry experts, such as the E-Gaming Federation and All-India Gaming Federation, express concerns about the decision's impact on the viability of the online gaming industry and its growth trajectory.
The online gaming industry has shown significant growth, attracting foreign direct investments (FDI) and contributing to the Indian economy.
The steep rise in GST is expected to discourage both domestic and foreign investors, potentially hindering the industry's growth and investment prospects.
The government's inclusion of online gaming and horse racing in Schedule-III of the Central Goods and Services Tax Act will categorize them as taxable actionable claims, grouping them with gambling activities.
The distinction between games of skill and games of chance is being revisited, with the government classifying online gaming under taxable claims.
The classification of games often relies on state legislation and court judgments, with online gaming being considered a skill-based activity protected as a fundamental right under the Constitution.
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