In the last couple of years, the world of online games has experienced unprecedented success and reached global popularity measured by millions of players and billions of dollars. Although a big reason for this success is the increasing availability of the Internet, smart devices, and the general progress of technology; states also play a big role, which either support or prohibit online gambling. Given that the industry is booming, the governments of many world countries have found ways to legalize online gambling, giving their citizens a chance for a new leisure activity, but also a chance to make money.
While many countries are trying to follow exactly this example, the Indian GST (Good and Service Tax Council) council has been the target of numerous criticisms in recent days, both from large industry players and numerous iGamers and bookmakers. After the last meeting, the GST Council remained undecided on the issue of taxation of online games, and why this caused numerous discussions, read below.
The GST Council and Its Role
To properly understand the importance of the current situation, it is necessary to understand the role of the GST Council and its decisions. The GST Council is India's constitutional body primarily responsible for making recommendations on all matters relating to the implementation of the Goods and Services Tax. Their role is to resolve all disputes, ensuring simplicity in shaping India's financial situation. Due to its nature, which is characterized by exponential growth and significant revenue potential, both for operators and players, Internet games and online gambling have become one of the main topics of this council over time.
To get an even clearer picture, we will tell you that until recently the taxation of online games and online gambling was approached rather casually, however, the council decided to introduce a few changes and raise the taxation rate to 28%. Additional dissatisfaction was brought not only by the relatively high tax rate, but also by the council's decision to pay the tax on full-face value, and not only on gross gaming revenue, making it a turnover-based tax.
The Key Issue: GST Council’s Debate Over Tax Rates
A key problem that has emerged after the end of the last session of the GST Council is the uncertainty surrounding the taxation of games of chance in India. Namely, many players in the gaming industry were hoping that the council would consider reducing the high tax rate of 28% that is applied to online gambling, horse racing, and casinos, but unfortunately, this was not an important enough topic for the council to devote to it. attention. In fact, it was not even on the agenda of the meeting at all, which caused numerous protests and postponed the final decision until further notice.
What’s at Stake?
Prolonging the making of the final decision on the reduction of the tax, as well as what it includes, does not come without consequences.
A high tax rate - 28% of the tax, which is calculated on the full-face value, instead of only on the operator's profit, will significantly affect the financial situation of many operators, especially those with smaller traffic. Therefore, if the postponement of the final decision continues indefinitely, a high tax could discourage future investments by online gaming operators, and therefore significantly affect the success of the industry.
Impact on players - Given that the tax is calculated in the full-face value, it is very possible that the companies, which until now have taken care of the inviting experience of the players, will now transfer part of their costs to them. In other words, it is possible that the costs of participating in the games will "go up", which will turn off those players who played on a budget, as well as many others. Hence some casinos offer additional benefits to their players by trying to increase traffic. An example is bonus offers from IndiaCasinos.com, which, no matter the alarming situation, is still trying to provide some exclusive benefits to its customers.
Stakeholder Perspectives
As can be assumed, in such an unstable situation, the perspective of investors, such as operators, investors and players, is very cautious. Investors will probably direct their investments somewhere where "the grass is greener", and where a bright future can be seen for their investments. In a situation like this, even the game operators themselves will not engage in any new unnecessary scams, because they will expect reduced traffic on their platforms. As for the players, we have already mentioned that their concern starts from the fact that the operators will redirect a certain part of the costs to players, increasing the cost of playing. Furthermore, expecting that companies will be investing less in the creation and upgrade of their games, the level of gaming enjoyment will be considerably lowered.
In the end, we can say that the indecision of the GST council, on making the final decision on the reduction of taxis and the taxation of online gaming in general, will have a profound impact on the future of this industry in India. The uncertain future has already caused dissatisfaction and confusion among numerous actors in this once-potential industry, which, if this kind of indecision continues, will probably experience a decline.