Karnataka govt appears divided over 28% GST on online gaming industry

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Karnataka’s revenue minister, Krishna Byre Gowda, represents the state in the GST Council. Recently, he spoke in support of the Council’s decision to levy 28% GST on full face value, calling it “eminently justified” as lower tax will incentivize betting.

Gowda has revealed that the report was worked upon for about three years and there was an overwhelming consensus among the members. He stated that while the supporters of the games differentiate between skill and chance, they are merely trying to hide that online gaming is basically a betting activity.

The revenue minister further added that levying GST on the said GGR will lower the tax rate for these companies to 5%-6%, questioning if it is reasonable to tax betting activities lower than essential food items.

On the other side of the coin, Karnataka Information Technology and Bio Technology minister Priyank Kharge criticized the Council’s decision. Kharge believes that the decision might hinder the country’s goal of becoming a US$ 1 trillion digital economy by 2025.

“Gowda is a GST Council member, and whatever he says represents the state’s position—I’m not denying that. Gowda’s thinking is right. However, the issue arose because the gaming companies registered here, or the federations didn’t approach us earlier; if they had, I would have arranged a joint meeting to ensure clarity,” Kharge said.

Talking to Moneycontrol, Kharge said that it is unfortunate that Rajeev Chandrasekhar and Nirmala Sitharaman, both hailing from the state, are unable to differentiate between gaming and betting.

While everyone is against betting, Kharge believes that a blanket ban without differentiating between skill and chance will only cause harm to the industry.

MeitY has already announced the new online gaming rules and is currently in early stages of formulating a sustainable online gaming framework. After it is established, MeitY is planning to request the GST Council for reconsideration of its decision based on the framework.

Notably, the gaming industry is estimated to reach over Rs 16,700 crore in 2023 and Rs 23,100 crore by 2025 according to a FICCI-EY report, but the recent changes may affect the growth rate.