Claims of demise of online gaming industry due to 28% GST exaggerated, says TN Minister

Claims of demise of the online gaming industry on account of the flat 28 percent GST imposed on it are exaggerated, feels Palanivel Thiaga Rajan, Tamil Nadu Minister for Information Technology and Digital Services. However, he also warned that such perceptions could potentially lead to a loss of revenue for states.

To find a middle ground, the minister in an exclusive interview with CNBC-TV18 proposed implementing a 28 percent Goods and Services Tax (GST) on online gaming, based on a well-defined Gross Gaming Revenue (GGR) model. This approach aims to strike a balance between regulating the industry and generating revenue while ensuring that it continues to thrive and contribute to the economy.

Rajan emphasised the need for clarity in differentiating between gross gaming revenue and platform fees in the gaming and gambling industry. He pointed out that only an entry-exit check mechanism would provide a clear demarcation between these two components. This is crucial for ensuring fair taxation and compliance within the gaming industry.

The Minister highlighted the significance of the "game of skill" versus "game of chance" classification. He stressed that this classification is not a trivial matter and has far-reaching implications for taxation and legal jurisdiction. Moreover, he pointed out that court judgments in gaming-related cases often rely on precedents, making it essential to address the intricacies involved.

The minister suggested that horse racing, online gambling, and casinos should be subjects of separate discussions. He specifically mentioned that horse racing, governed by state legislation, could have been taxed similarly to alcohol. However, the lack of radical ideas within the GST council prevented such an implementation.

Minister Rajan expressed concerns about the existing GST structure for gaming, particularly for games with odds of winning at 1/3 or 1/5. He argued that the current 28 percent GST rate could unfairly skew the odds. To rectify this, he recommended a system where gaming revenue is booked into two separate streams, enabling proper taxation and a more equitable approach.

During the interview, the minister also criticised the functioning of the GST council, stating that agendas were set without adequate forward planning and thought. He acknowledged that teething troubles were understandable, given the relatively recent establishment of the GST council in a 75-year-old country. However, he emphasised the importance of putting crucial decisions, such as the continuation of compensation, to a vote within the council.