The Goods and Service Tax (GST) Council recently decided to impose a 28 percent tax on online games. Although no objection has been noticed from the players on online games apps, the app companies which run these games raised objections. These app companies claimed that they would suffer losses due to the imposition of GST on online games. A few days back, 180 gaming companies asked the GST Council to reconsider its decision.
Gaming companies argue that the proposal to levy GST on the full deposit amount will reverse the growth trajectory of this 'industry'. Not only will the existing companies suffer, but also the existence of new smaller players will become difficult. These companies further claim that fresh investment by domestic and foreign investors in this sector will be discouraged and that the entire startup ecosystem will be affected by this decision.
Though the government did not give any argument for and against gaming apps while explaining this decision to impose GST, it is a fact that there is a great deal of concern in various circles due to the increasing addiction of youth to these online games and the anomalies and crises caused by these games. The government is well aware of this menace. It must be noted that a total of 40 million people play these online games, and 10 million do it regularly.
The government says that so far only 2-3 percent GST is levied on these games, which is less than 5 percent GST on food items consumed by the common man. By imposing 28 percent GST, the government is expected to fetch a revenue of Rs 20,000 crore.
Matter Of Concern
Many types of online games have emerged in the last few years. Even renowned personalities from the sports and entertainment sector are promoting these apps run by many big companies. However, these same ads also carry a quick warning, 'Play these games carefully, they can be addictive'. In fact, today our youth are getting trapped in the clutches of apps and games endorsed by these celebrities. For some time, due to the expansion of the internet and mobile phones in the country, this real money gaming 'industry' has expanded more and its scope is increasing fast.
Many online and app-based games including share-trading-related games, crypto-based games, rummy, ludo and virtual games (fantasy sports) are called 'real money games' as these games are played for money or awards. Some of these games are said to be skill-based and some others are based on chance (i.e., gambling). Be it chance-based or skill-based, all online games have expanded rapidly and the companies promoting these apps and websites are making huge profits. But the matter of concern is that due to these games, the future of our youth is endangered.
Since the advent of these games, many young people have lost their lives after getting into a debt trap. It has to be understood that the chances of winning in these games are very low, yet due to gambling addiction, the young start taking huge debts and their families are ruined. Today, apps like Dream 11 have become famous all over the country due to endorsement by big cricket personalities. Apps like Ludo are being endorsed by big names in the entertainment industry like Kapil Sharma and many other celebrities. Most of the youth who commit suicide after getting trapped in these apps are between 18 and 25 years of age, and include students, migrant labourers and businessmen.
Skill Or Chance
In the context of Dream 11, most of the courts have justified it by saying that it is not gambling but a game of skill. Despite that six state governments have banned or not allowed such virtual cricket platforms. Similarly, Andhra Pradesh chiefminister YS Jaganmohan Reddy has requested a ban of 132 apps.
Even if it is assumed that there is no chance element in a virtual cricket game and hence it is not gambling, but some sports psychologists believe that virtual cricket is actually gambling and can lead to pathological gambling behaviour. Companies involved in this business are not willing to accept that it can lead to addiction and they argue that the average deposit amount is very little. But the reality is different from this. This statement is proved wrong by the fact that those who committed suicide were in huge debt of lakhs of rupees after losing in these games. So, it is not fair to believe the claims of these virtual sports app companies. The most important thing is that there is no regulatory authority regarding these games, and this business is only self-regulated. There is a huge difference between the claims and reality of the companies involved in this business.
Courts are yet to decide whether so-called skill-based games involving money bets are gambling, but any game involving an element of chance is gambling and may not be legal under the law of the land. It is also seen that many apps are running pure gambling platforms in the garb of skill-based games. Importantly, these apps are heavily funded by foreign investors, especially Chinese investors, and their sole purpose is to make people addicted to gambling. The design of these apps itself is addictive. Not only this, but by tampering with the software of many so-called skill-based games, customers are being fooled and looted. Not only the 276th report of the Law Commission of India, but even the Supreme Court has also commented that the results of these skill-based games can be influenced by mechanical tampering.
Effect Of GST
The government levies GST on all goods and services except agricultural commodities. There are certain goods and services that cannot be allowed into the country. Activities like gambling, prostitution, theft-robbery etc, are legally prohibited in our country. Apart from this, there are some things whose production and consumption are discouraged and it is the social responsibility of the government to minimise them. Tobacco and liquor are classic examples in this regard, and maximum tax has been levied on tobacco products and liquor in the country. In the budget for the year 2023-24, the finance minister imposed an additional tax on cigarettes, over and above the highest rate of GST. Online real money games are yet not properly defined, whether it is ‘gambling’ or ‘games of skill’. But since there is a high possibility of losing money in these games, if such games are taxed less, it would go against social welfare.
It is absolutely an appropriate step by the GST Council to impose the tax on these virtual games at the maximum rate, as it is a kind of social evil. No civilised society can accept situations like increasing debt and suicide among the youth due to the growing addiction towards these games and the huge financial loss caused to them. Obviously, the highest rate of GST imposed on deposit amount on these games by the government is an indication that the government is sensitive to the miseries of the youth who lack information and maturity and are squandering money in gambling through apps or so-called skill-based games.
Ashwani Mahajan is a professor at PGDAV College, University of Delhi, and the national co-convener of the Swadeshi Jagran Manch. Views are personal and do not represent the stand of this publication.
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