A bullock cart and a Jet Plane in the same hangar — the absurdity of clubbing gambling and online gaming in GST

— Akshara Bharat
In the complex maze that Goods and Service Tax (GST) has now become, the powers that decide the fate of this instrument, have in their infinite wisdom created a unique category. It is called Casino, Lottery, Horse racing and Online gaming. In one stroke, a modern hangar is now home to jet planes as well as bullock carts.
Casino and its various forms represent gambling, an undertaking, as old as the bullock cart. Casino and lotteries are universally recognised as a game of chance – where luck plays a predominant role in deciding the winner.
Online gaming, on the other hand, is a modern phenomenon, played on PCs, consoles and mobile. In its competitive form, it’s called esports. It is a medal event at the Asian Games and its professional leagues attract an audience of hundreds of millions. Skill, talent and knowledge are the main factors that decide the winners in online gaming.
Should the hangar now be home to jet planes, bullock carts and horse carriages? By clubbing casino, lottery and online gaming, the GST committee has not only done great disservice to the booming online gaming industry but also created a great deal of confusion.
The Hon’ble Finance Minister Nirmala Sitharaman herself appears to be confused. In the press conference on June 30th, she said “Whether it is horse racing or online gaming or casinos, the common thread that the Committee highlighted is that they are part of betting and gaming… In other words, they are essentially gambling. There may be an element of skill in it or an element of chance in it. But essentially, all the three are gambling,”
This is a colossal misunderstanding and one that can derail India’s progress towards becoming a gaming superpower. The Hon’ble Prime Minister Narendra Modi himself recognised the potential of the online gaming industry and has said India has the potential of leading the world in the digital gaming sector. The online gaming industry has emerged recently owing to technology innovation and growing smartphone & internet penetration. According to the All India Gaming Federation, it has a potential to create around 60,000 highly skilled jobs and attract over Rs. 20,000 crores of FDI in the next few years. A KPMG report said that the Indian online gaming industry was worth Rs 13,600 crore in FY 2020-21 and likely to reach Rs 29,000 crore by FY 2025
The Hon’ble Finance Minister herself in the last Union Budget announced the setting up of the AVGC promotion task force to look at ways to build domestic capacity and also to serve the global demand in the Animation, Visual Effects, Gaming and Comic (AVGC) sector. G (Gaming) is an important letter in the term AVGC and one that probably has the most potential of the four sectors.
Various judicial pronouncements from High Courts as well as the Supreme Court of India have clearly outlined the difference between Games of Skills and Games of Chance. The GST Committee by clubbing casinos and lottery along with online gaming, has created fresh confusion. It is time to clear the air on this and treat the games of chance ( Casino & lottery) distinctively from Games of Skill (online gaming).
There are global examples that India can learn from. In Denmark, casinos pay anywhere from 45 % upto 75% of their Gross Gaming revenues (GGR). The taxation system for online games is different. It is just 20% of the GGR. In Germany , the GST on online games is just 19% of GGR, whereas Casinos pay 90%.
While formulating the new GST principles, there is one element that India needs to watch out for and weed it out of the system. There has been a mushrooming of foreign gambling companies parading their wares in India. They run illegal online casinos and betting operations, ensnaring millions of unsuspecting citizens of India and robbing crores of rupees from the Indian exchequer. They are the ones who are rejoicing as India decides to house gambling and online gaming together in the same hangar. They are the ones who will prosper and thrive, if the domestic online gaming industry wither away
The Indian online gaming industry is not just the equivalent of jet planes. It is a rocketship that can truly fulfill India’s true potential as a gaming powerhouse of the world.
(Akshara Bharat is an analyst with Policy Matrix, a policy consulting and research firm)