Karnataka revenue minister Krishna Byre Gowda has expressed himself against any change to the GST levy on the online gaming sector, arguing that there has not been any disruption after the new rate kicked in and that the concerns expressed earlier have turned out to be “imaginary”.
There have also not been any compliance issues, Gowda, who represents Karnataka on the GST Council, told ET ahead of the council’s meeting scheduled in New Delhi on Monday.
All online gaming companies, the minister said, were declaring a higher turnover. Revenue has gone up by three to four times in the case of some states, he said.
Maharashtra, Karnataka and the National Capital Region of Delhi are home to many gaming firms.
Earlier, an 18% GST was levied only on the platform fee. The GST Council, at its meeting on July 11, 2023, decided to tax online gaming, casinos and racecourse at 28% on the full-face value of bets. The new tax rates took effect on October 1, 2023.
“The GST Council took a decision after two years of deliberations. We (Karnataka) were a vocal proponent of the decision. Prior to that, concerns were expressed that the GST levy would lead to wipe out of the (gaming) industry, loss of jobs and the online gaming sector would go into the dark net,” he said, adding: “As we have noticed, nothing of that sort has happened.”
The current rate and the method of levying GST on online gaming are clearly working well, he said. “The system has stabilised. It is working well. There is no justification for re-examining the method of GST on online gaming.”
The council’s members have asked for a presentation on the performance of the levy on the gaming sector over the past six months. “We will look at it and get a status update. My information is that it (28% levy) was a positive decision that has led to a positive outcome. There have not been any complaints about compliance either. All kinds of imaginary concerns were raised, but there has been no basis for apprehensions.”
Rates Stable
Gowda, who is also a member of the group of ministers on GST rate rationalisation, said some changes have already been done in the past.
Airing Karnataka’s stand, the minister said, people have come to accept the rates which, he said, have stabilised.
“Stakeholders have come to become acquainted with the current rate structure. At this point, altering the rate can cause disruption. A lot of change has happened and finally rates are stabilised. Karnataka is of the opinion that this is not the right time to alter rates,” he said.
Gowda, however, added that he was not claiming there had been 100% stability or acceptance by stakeholders, but by and large there had been some stability and acceptance. “There is no need for systemic-level change in the rates,” he added.
One of the demands, he said, was to bring down rates from 12% to 5%. “I am sad to say this is unfortunate. When a rate is raised, trade and industry does not factor in the input tax credit (ITC) and passes on the additional tax burden to consumers. But when the rate is reduced, there is a hue and cry about the ITC blockage. It appears we get all the blame for the increase in taxes, but the benefit is not passed on to people. There is a feeling among decision makers that often the interest of consumers is not served by such rate changes,” the minister said.
“Some of us are of the opinion that the system has stabilised and must allow it to function. We can, maybe, look at exceptional cases, but the case for large-scale alternation is not necessary is the thought process,” he said.