Karnataka plans to implement 28% GST on real-money gaming sector via draft ordinance

Karnataka plans to impose a 28 percent GST on the real-money gambling business through a draught legislation, making it one of the first states to adopt the higher tax rates for the expanding sector.

According to sources, the draught regulation will be discussed in the state cabinet meeting on September 7. According to a senior government source, the government has to pass an ordinance because the GST Council, led by Finance Minister Nirmala Sitharaman, has requested all states to implement the decision by October 1, 2023.

“The draught ordinance has been prepared by the finance department and will be presented to the state cabinet,” the person added.

Krishna Byre Gowda, Karnataka’s revenue minister who represented the state in the GST council, stated that the council discussed on the topic for approximately two years and that the decision was taken after “prolonged and exhaustive discussion and deliberation.”

“If the decision is made after such a thorough process, the public interest requires that we implement the decision as soon as possible. In fact, additional delay would be detrimental to the public interest,” he stated.

The increased revenue, according to the finance department’s additional chief secretary, is likely to be in the region of Rs. 800 crore to Rs. 1,000 crore each year for Karnataka. The state administration led by the Congress wants Rs. 50,000 crore to Rs. 60,000 crore each year to execute five poll promises.

State IT-BT minister Priyank Kharge stated that he was not aware of the move to propose the draught ordinance imposing a 28 percent GST on online gaming to the state cabinet.

The Karnataka administration was previously believed to be divided over the GST Council’s recent decision to slap a 28 percent tax on the real-money gambling sector. Kharge previously stated that the levy would be detrimental to India’s $1 trillion digital economy ambition.

On July 11, the GST Council voted to levy the highest GST slab of 28% on the whole worth of money spent by users to play skill-based games, with no distinction made between games of skill and games of chance. Gaming platforms are now subject to an 18% GST on platform fees. However, the council has committed to evaluate the levy six months after its introduction.

Finance Minister Nirmala Sitharaman submitted legislation to change the Central and Integrated GST laws on August 11, the last day of the Monsoon Session, and they were passed in both Lok Sabha and Rajya Sabha. On August 19, President Droupadi Murmu also gave her consent to the modifications.

The real-money gambling business, which presently accounts for around 77 percent of India’s overall gaming earnings, has been severely impacted by this decision, since it would impose a huge tax burden on the corporations.

According to industry leaders and other stakeholders, the new rules would increase a company’s tax burden by 350 to 400 percent, greatly impeding the sector’s growth trajectory.