He said the online gaming industry currently only pays 2-3% GST, which is still less than 5% applicable tax on groceries consumed by an ordinary man.
“In fact, one of the GST Council members pointed out that the way online gambling companies pay online gambling taxes at 18% of the GGR, which is only about 2-3 percent, even less than the 5 percent tax rate levied on many food items consumed by the most ordinary people,” Malhotra told PTI in an interview.
Last year (FY2022-23), the Ministry of Finance collected only Rs 1,700 crore in GST, which could have been Rs 15,000 to 20,000 crore if the tax had been levied on the full value.
“But this (tax by online gambling companies) is on a much lower rate than online gambling companies pay. Our estimate is that it should be at least around 8 to 10 times that amount. So if this is true, it should be around Rs 15,000 to 20,000 crore per year, provided volumes also hold up,” he said.
These companies took refuge under the differentiation of games of skill and chance and paid 18% GST on platform fees alone or on gross gaming revenue (GGR). Earlier this week, the board clarified that GST should be paid at 28% on the total face value of bets. He added that wherever there is tax evasion or evasion, those aspects will certainly be looked into and those taxes will be recovered, he said.
“As you may be aware, we will also be challenging the High Court’s decision in the Supreme Court. So our decision to collect tax at higher rates will of course also depend on the outcome of the Court’s judgment. Unless and until we have a judgment in our favor, we will not be able to recover taxes at the higher rates,” he said.
On the possibility of a review following concerns expressed by the online gambling industry, Malhotra said: “The board was very unanimous. It made this decision after deliberation. It made this decision after consultation with the industry. There has been extensive consultation as you are aware that this decision has been pending for two or three years.”
Whether that decision be reconsidered, he said, “The decision has just been made. I really don’t think so. Of course, that’s up to the council to decide. I really doubt it because that decision was unanimous and the decision was made as I mentioned after consultation and deliberation, so I don’t think there’s any chance of a review that early.
As to whether the high tax rate would incentivize undesirable entities to operate from overseas, Malhotra said that would be a challenge, but there are ways available with the government.
For example, he said, “We can have payment regulations and introduce provisions like the TCS.”
The government may even ban some of the gambling sites as has been done in the past, he said, adding, “They may even be regulated or banned. It would be our effort that if there is an illegal proliferation of these online games, then we will do everything we can to stem them. »