Tamil Nadu IT Minister and ex-member of GoM, Palanivel Thiagarajan, recently talked about why the GoM recommended 28 per cent GST at full face value during an interview with CNBCTV18.
During the interview, Thiagarajan revealed that there was no doubt about the GST rate but, instead, a series of questions. These include identifying the law, the difference between skill games and chance, and deciding what is a chance game or skill game due to several contradictory judgements.
Taking all these into account, the government has to also think about the actual gross gaming revenue and how it can be calculated. So looking at the complexity of the matter, the higher rate tax was not the issue but instead how it is applied to and not disturb the revenue of the states from these activities.
However, online real-money gaming firms are not happy with the decision claiming that gaming startups will be shut down. Furthermore, this will result in several layoffs and players shifting to illegal platforms.
Thiagarajan said that he had suggested that casinos and horse racing can be removed from GST law and instead put under state regulation. Only online games can be put under the GST regulation, but there was no consensus on that.
Another solution Thiagarajan suggested was that if people win the x amount of bet they placed or money they invested, they will not have to pay the GST, but this option was considered too complicated.
He was then asked his opinion on the GST council meeting on 2 August as this is the first time a meeting will be taking place after arriving at a decision and to operationalize it.
Thiagarajan asked if the decision was a reiteration of the law, why was there a need for a GoM and the first report was sent back only for it to come to the same conclusion again? According to the IT minister, the decision was not made with proper planning. While he believes the council is new, some issues must be addressed.
Speaking on the best way forward on the already made decision, Thiagarajan believes that the government will need a proper way to prevent people from shifting to illegal platforms in case of online gaming. In case of horse racing and casinos, the implementation can be simple.
On the growth side, the increased tax rate will have some effect on the industry’s growth; in the worst-case scenario, it can move players to use illegal markets. In his opinion, the best solution will be to get on common ground with the government taxing the gross gaming revenue (GGR), with the industry needing to reveal what constitutes their GGR.