IAMAI Urges GST Council To Keep 18% Tax On Online Gaming

The Internet and Mobile Association of India (IAMAI) on Monday urged the GST Council to continue maintaining the GST on online gaming at 18 per cent and any further increase will hamper the overall wellbeing of the industry.

Discussions are ongoing among various stakeholders to increase the GST rate to 28 per cent for the online gaming industry.

There is no clarity on whether this will apply only to real money games or casual games as well, given that the former being a sub-segment of online gaming.

“Any such increase in the GST rate is likely to turn businesses in the sector unviable, leading to complete shutdown which, in turn, will result in loss of a large number of jobs,” the industry body said in a statement.

This will also result in “a loss of investor-confidence debilitating India’s online gaming industry, which is currently witnessing fast and exponential growth of 35 per cent CAGR,” the IAMAI added.

According to a recent report by BCG and Sequoia, the Indian online gaming industry is expected to reach $5 billion by 2025.

The industry body said that increasing the GST rate will lead to an erosion of tax-base on the one hand while encouraging the spawning of grey markets on the other.

“It is also essential to treat only the Gross Gaming Revenue (GGR) or Platform Fee as liable to GST at 18 per cent and to treat the ‘prize pool’ as the actionable claim as per Entry 6 of Schedule III of the CGST Act, 2017,” it added.

Multiple industry experts have opposed clubbing the online gaming industry in the 28 per cent GST bracket along with racing, gambling and betting.

Earlier this month, the Group of Ministers (GoM) on casinos, race courses and online gaming discussed various aspects, including the possible GST rates and technicalities.

GoM Convener and Meghalaya Chief Minister Conrad K. Sangma said the meeting also discussed whether there be a common or different GST rates on online gaming.

According to Sangma, the annual turnover of online gaming only is around Rs 30,000 crore and the annual growth is 25 to 30 per cent.

Few more technical aspects were needed to be discussed before the next meeting of the GoM this month.


Are You A Freelancer? Here Are Three Things You Should Know About GST

The pandemic has changed the world in a lot of ways. Just as work from home has become the norm for most corporations, there has been a rise in the demand for freelancers, too. These freelancers are not tied to one company; rather, they offer their services to several companies.

While freelancing comes with a lot of flexibility, freelancers often find themselves so tied up with projects that they often fail to pay proper attention to their finances. One important aspect of freelancing work is the goods and services tax (GST) that freelancers need to pay.

Here, we will look at three things freelancers should know about GST. 

GST registration threshold:  Salaried employers are not required to pay any GST. However, freelancers with an annual turnover of more than Rs 20 lakh fall under the ambit of GST, and have to pay an 18 per cent GST for income earned from freelancing services. Freelancers need to pay GST when the annual turnover is more than Rs 10 lakh (for specific cases of north eastern states). Eligible freelancers need to register for GST.

You may also register voluntarily for GST: If your income from freelance is less than the threshold limit, you do not need to pay any GST. However, a freelancer can choose to register under GST, even if the annual income is less than the threshold limit.

“If a freelancer voluntary obtains for GST registration, he/she will have to abide by the provisions of the GST law. Also, he/she would be required to undertake all the related compliances and pay the applicable GST. However, obtaining voluntary registration could increase the overall compliance burden,” says Krishan Arora, partner at Grant Thornton Bharat.

Getting a GST registration is helpful when working with b2b clients as they normally do not work with unregistered clients.
“Obtaining GST registration would also help to reduce the input GST costs which a person might incur on procurements, which would then be available as credit to such freelancers,” adds Arora.

Services provided on online marketplaces: GST rules apply if the freelancer is working for a client directly or through a freelancing platform, such as Freelancer or Upwork. “The liability to collect/ deposit the same with the IT department would remain with the ultimate service provider in both scenarios,” says Arora.

Also, when it comes to online market places, it is important to analyse whether such a marketplace would qualify as an ‘e-commerce operator’ under the GST law. In such a case, there are additional compliances which need to be undertaken by such marketplaces. Online marketplaces which qualify as e-commerce operators would also need to collect a tax collected at source (TCS) of one per cent from freelancers who are supplying goods and services through their platform. Credit for such TCS may also be available subject to certain conditions.


Complex GST compliance to sell online among reasons for MSMEs’ low digital penetration: FISME

Ease of Doing Business for MSMEs: One of the reasons for the low digital penetration of MSMEs are complex Good and Services Tax (GST) compliance requirements needed to make the transition from offline to online selling platforms, said MSME body Federation of Indian Micro and Small & Medium Enterprises (FISME). “Only around 10 per cent of India’s small businesses sell online,” FISME added as it urged the government for efforts required to simplify the GST system, rationalise rates, and harmonise GST thresholds between offline and online sellers.

Currently, online businesses are required to register under the GST system regardless of their turnover even as for offline sellers, it applies to businesses with a turnover of over Rs 40 lakhs. This creates an unequal playing field between offline and online retail and has discouraged small businesses from becoming a part of the digital economy, said FISME in a statement on Friday.

“Digitally-enabled MSMEs have the potential to grow twice as fast as their offline counterparts. There is a dire need to educate and encourage MSMEs to sell online, and spread awareness of the growth opportunities available through e-commerce platforms,” said Anil Bhardwaj, Secretary General, FISME.

Around 5 crore MSMEs are estimated to be unable to sell online due to complex and mandatory GST requirements while those operating through online platforms are burdened with cumbersome and time-consuming periodical compliances like registration and filing monthly returns, which further dissuades them from registering under GSTN, the association noted citing market intelligence and secondary research.

Earlier this month, the traders’ body Confederation of All India Traders (CAIT) had also released a survey on GST compliance recording responses from 630 traders. While 72 per cent respondents believed e-commerce is a significant channel for business, 66 per cent said GST registration is a big hurdle. Moreover, 94 per cent respondents said e-commerce companies are killing their business by their monopolistic terms and flouting policies while 89 per cent opined that e-commerce policy and rules are necessary for a fair e-commerce business.


Maharashtra: Firm proprietor held by GST dept for Rs 8 cr tax evasion

THE THANE Central Goods and Services Tax (CGST) unit unearthed a fake input tax credit (ITC) racket and arrested the proprietor of a Dahisar-based firm on May 12, for fraudulently claiming Rs 8.05 crore in tax credit.

The department found that JJ Lime Depot — a company trading in construction material — had issued bogus invoices of over Rs 40 crore for passing on fake tax credits without any supply of goods in violation of provisions of the CGST Act, 2017.

“In his statement, recorded during the investigation, the firm’s proprietor admitted that he had issued fake invoices to many Mumbai-based infrastructure companies for commission,” said the department in a statement.

The proprietor was arrested under Section 69 of the CGST Act, 2017 for contravention of Section 132 of the CGST Act, 2017, said the tax
authority. He has been remanded to judicial custody for 14 days.

During the financial year 2021-22, the CGST Thane Commissionerate detected GST evasion of Rs 1,354 crore and recovered Rs 34 crore.

Seven tax evaders were also arrested, said the department.

“In the last financial year (2021-22) revenue realised was Rs 5,121.16 crore compared to Rs 3,236.77 crore during the financial year (2020-21), which is an increase of Rs 1,884.39 crore in absolute terms and 58.22 per cent increase compared to the previous year,” said Rajan Chaudhary, Commissioner, Thane CGST.


Bhagwant Mann to hold meet on GST relief today

Chandigarh, May 13

Punjab is staring at a major crisis in the coming days, with the compensation for the rollout of goods and services tax (GST) about to end in June. The state stands to lose about Rs 15,200 crore annually, if the compensation is stopped by the Centre in June.


This had set the alarm bells ringing in the corridors of power. An urgent meeting to discuss the issue has been convened by the Chief Minister Bhagwant Mann on Saturday.

Sources said the state government would be urging the Centre to continue giving this compensation, as most of the state’s taxes were subsumed once the GST was rolled out. Other than getting taxes through value added tax (VAT) on retail fuels, excise duty, stamps and registration, and land revenue, there was a limited scope with the state government to impose any new taxes.


GST rate hike: CBIC Chairman says GST on some sin goods such that it can’t be hiked further

New Delhi: Amid the buzz surrounding a fresh Goods and Services Tax (GST) rate hike being planned by the GST Council, Central Board of Indirect Taxes and Customs (CBIC) Chairman Vivek Johri has said that some items that are viewed as sin goods already have seen GST rates going up to a point where no room is left for any further taxation.
Sin taxes are generally levied for public health purposes on products such as alcohol and cigarettes. These higher taxes are aimed at discouraging the consumption of such products by making them unaffordable for the public.
Despite sin taxes, the consumption of tobacco, alcohol and similar products has shown a continued rise annually. CBIC Chairman Joshi, speaking at an event organized by industry body FICCI’s Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE), added that the Centre is taking a holistic approach to taxation, keeping in mind the public good along with maintaining revenue buoyancy.
 Pointing out that CBIC is moving aggressively against all forms of illicit trade, Johri said, “In 2021-22, we seized 92,000 kg of narcotics worth Rs 17,400 crore, during this period, we also seized 14 crore cigarette sticks.”
Future GST collections
Johri expressed that going forward GST collections are expected to bring in Rs 1.3-1.35 lakh crore on a monthly basis in the current fiscal. The revenue predictions are a tad lower owing to the customs side remaining under pressure due to rising commodity prices.
“Global and inflationary headwinds will have a continued pressure on our revenues but I am hopeful that we will be able to deal with them in the year. As GST completes 5 years, we are very clear on reducing abuse of the tax system and improving the tax compliance for taxpayers,” he stressed.
Further, the body is working out ways to eliminate wrong-doers and improve the system for genuine taxpayers.

Indian crypto industry seeks dialogue with Govt on 28% GST blow

Crypto industry is looking for a dialogue with the Government as the Goods and Services Tax (GST) Council may now put cryptocurrencies and related services under the 28 percent tax slab. The Government had already levied to the 30 percent tax on gains from crypto assets and a 1 percent tax deducted at source (TDS) on transactions.

The industry has already witnessed a massive drop in transaction volumes over the last one month, since the income tax came into effect on April 1, and the possibility of a higher GST rate is likely to damage the industry further.

From discussions with industry participants, Moneycontrol learns that exchanges are worried about what this could mean for the future of crypto trading in India.

“We are obviously not happy with this thought process. It’s going to get very difficult if they take such a view. No country has taken such a view and the upcoming TDS is already challenging. Frankly, we don’t know what the thought process is, do they want to ban it without banning it? We have no idea,” said an industry source who did not wish to be named.

He added that the industry hopes to approach the government for talks.

“For something like this, ideally, we would want to have some facetime with the government. On the one hand, we have heard that the government will take its time but on the other that it may regulate the industry soon, these are mixed signals,” said the person.

Akshay Aggarwal, venture partner at Draper Dragon Fund, believes the proposed measures will further fuel the trend of crypto exchanges and talent moving out of India.

“Apart from retail investors, it would also affect algo crypto traders who trade based on algorithms. While trading volumes will be hit, these exchanges are registered outside of India and they will start foraying into other markets,” he said.

The possibility of a 28 percent GST rate on crypto was first reported by CNBC-TV18. Crypto exchanges are currently paying 18 percent GST on services provided by them. And while the date for the next GST Council is yet to be decided, experts expect a decision soon.

“Now that a rate of 30 percent tax coupled with a 1 percent TDS has been announced for income tax, the next major announcement is the rate of GST and how it is going to be treated. The definition of VDAs (virtual digital assets) is likely to be similar to what is there under the IT regulations,” said Rashmi Deshpande, partner at corporate law firm Business Law Chamber.

“Keeping in mind the high rate of tax on income, the reasonable expectation would be to have a fair rate under GST to ensure that not only the government gets its revenue but the industry also sustains. It also needs to be seen if the government comes up with any different set of rules for crypto assets, like a  valuation mechanism,” she added.

More importantly, the industry is still dealing with a lack of clarity on multiple factors when it comes to the income tax itself. A new diktat even before the previous questions are answered will only create more confusion for customers and exchanges.

“Before levying tax and GST, the government should have given some clarity around the industry. This 28 percent GST will mostly be borne by the customers now, which will obviously make it difficult for them to trade. Also, if an investor is transacting on an international wallet, how will they pay the GST?” said Kashif Raza, founder of crypto education platform Bitinning.

The 1 percent TDS too is seen as onerous enough to discourage customers and create tonnes of extra paperwork for the government as well.

In the past month, some banks including Kotak Mahindra Bank have withdrawn support from crypto exchanges, leading to a reduction in payment method options on platforms. This was a domino effect after US crypto exchange Coinbase was forced to hold off from having the Unified Payments Interface (UPI) on its platform.

Moneycontrol had reported that the move by banks and the National Payments Corporation of India which operates UPI was more out of disquiet arising from Coinbase’s very public announcement.

But it is the GST levy that has players really worried. Sathvik Vishwanath, founder and CEO of exchange Unocoin, said, “A 28 percent GST will cause major disruption for the industry. Income tax is levied only on the profit, but GST may be levied on the complete transaction amount and that will be huge.”

On the other hand, for crypto investment platform Mudrex’s co-founder Edul Patel, the rate is not much of a concern.

“We are already paying 18 percent GST, 28 percent will not change much. Plus with the 30% income tax and TDS it was already clear that the government doesn’t want to encourage trading. This another step towards that.”

The industry might not get a very sympathetic hearing given that the government and the Reserve Bank of India continue to have concerns that cryptos do not come under the ambit of the Prevention of Money Laundering Act and Foreign Exchange Management Act and hence can be used for financing unscrupulous activities and for money laundering.


Heading for GSTExit

“Do not drink and drive” is a general dictum in most nations. But state governments in India would rather have their citizens drink more and drive more, albeit not together. Facetious as this may sound, it is only half in jest.

After the introduction of the Goods and Services Tax (GST) in 2017, state governments lost their independent taxation powers. The only two significant avenues for states to generate their own tax revenues, without having to seek approval from the Union government, are liquor and fuel since they are outside the GST’s ambit. Alcohol and fuel combined account for over a third of states’ own tax revenues, up from a quarter before GST. Specifically, alcohol’s share in overall state taxes has increased by 50 per cent from the pre-GST years.

When the entire country was under a Covid lockdown in 2020, state governments of all political hues were forced to keep liquor shops open, since they had no other independent means to raise resources and the Union government reneged on its GST commitments. The tragic irony of state governments relying on people’s alcohol habits to manage a health crisis was an unintended consequence of the GST.

Both the Union and state governments levy high fuel taxes to garner revenues that they do not have to seek permission for or share with each other. This fiscal confrontation is punishing the common Indian with the highest fuel tax rates in the world. To put it cheekily, for the fiscal independence of state governments, GST has induced a perverse dependence on people’s driving and drinking indulgences.

The solution to the problem of states’ growing reliance on liquor and fuel taxes is not to bring these sin goods within the GST ambit, as experts suggest. The roots of GST’s current woes lie not in economics but in politics. A technical approach to resolving GST’s issues through expanded coverage or rationalisation of tax rates would be myopic and futile.

Government technocrats from the Vajpayee government onwards have peddled the GST as a panacea that would untangle disparate taxation structures across various states, reduce transportation costs and create a unified market that would boost economic growth and yield buoyant tax revenues for everyone to share. They forgot that we do not live in an economy but in a society governed by politics.

The 2015 GST report by the expert committee chaired by the then chief economic adviser proudly proclaimed that the GST would help in “making one India” and waxed eloquent about the economic efficiency benefits of a centralised GST, achieved through curtailing states’ fiscal powers. This naïve technocratic endorsement of centralisation was exploited adroitly by the ruling political class to an expanded “one nation, one language”, “one nation, one religion”, “one nation, one election” flurry of anti-federalist and anti-pluralistic ideas of “one India”. It is not far-fetched to hold the view that GST may have inadvertently paved the path for the over-arching centralisation project by the Modi government in many other areas, under the garb of efficiency and uniformity.

Five years after GST, the promised economic gains are elusive. Tax buoyancy has actually declined post-GST. The Union and state governments started to fight as the money got tight. Fiscal federalism woes spilt over to other areas with state governors quarreling with elected chief ministers, non-BJP states complaining of unfavourable treatment by the Union government during Covid, the prime minister and chief ministers bickering over protocols in government events and so on. Fuel cesses, Hindi impositions, disputes over the NEET exam and a governor rejecting a duly approved state legislation are not disparate events. They are interconnected issues involving the same political leaders and institutions. The GST has ruptured India’s larger federal structure and destroyed trust between the Union government and states. Cooperative federalism cannot just be an economic compact but a broader ethic.

India’s GST is precariously held together by the loose thread of “compensation guarantee”, under which states surrendered their fiscal powers in return for guaranteed revenues. This thread is about to snap in June. The euphoria over record GST collections in the last few months is not enough to tide over the trust deficit that plagues GST.

Fixing GST requires a fundamental reset of the Union-states relationship and nurturing it back to a state of mutual trust and respect. Given the staggering economic, social and political diversity of India’s states, GST was always going to be a tough proposition for any government or prime minister. Implicit bargains such as revenue guarantee agreements between the Union and states are necessary but not sufficient to make GST tenable. Now that India is committed down the GST path, the onus lies with the Modi government to deftly balance all stakeholders and win back their confidence, rather than thrust GST further down the states’ throats such as bringing alcohol and fuel within its ambit. This would only constrain the fiscal sovereignty of states even more and exacerbate mistrust.

The GST brouhaha is no longer just an economic issue but a larger political issue of state rights with public opinion in states like Tamil Nadu, Kerala and Punjab stacked against the idea. Merely extolling its economic benefits is not enough to convince people in these states to embrace a retooled GST.

Perhaps there is a lesson to learn from another democracy, Britain, where public opposition to losing some sovereign freedom in return for economic gains of a common European market, was capitalised by politics, eventually leading to Brexit. If the Union-states relationship and the federal structure are not rebuilt with trust and faith soon, India may have to confront its own “GSTExit”.


Cryptocurrencies may soon attract 28% GST like betting and casinos in India

Goods and Service Tax (GST) Council is likely to consider levying 28 percent GST on cryptocurrencies. The government’s view is to bring cryptocurrencies at par with lottery, casinos, race course and betting, sources told CNBC-TV18.

The GST Council has nominated a law committee to take up the proposal to levy 28 percent GST on services and all activities related to cryptocurrencies soon. The law committee’s view will be tabled before the GST Council for a formal nod.
The proposal is likely to be tabled in the next GST Council meeting, but no decision has been taken on the date yet.
“There are various aspects of cryptocurrencies – the transactions involving cryptos, cryptos being used to make purchases, cryptos being received as payments. All these aspects are under examination and will be discussed by the law committee,” sources said.
The sources said that all crypto exchanges in India act as intermediaries. “They sell cryptos from foreign exchanges to people in India. So, this is a service, and currently, this is at 18 percent GST slab and classified as an intermediary service. They will have to be classified separately under a new head, under the list of services,” they said.
“So, every transaction will be subject to 28 percent GST, if agreed upon by the GST Council,” the sources added.
Online gaming (without betting) attracts 18 percent GST right now. However, the ones involving betting along with gambling, race clubs, attract 28 per cent.
Earlier this month, the panel of state finance ministers was unanimous on hiking the GST rate on casino, race course and online gaming services to 28 percent, West Bengal finance minister Chandrima Bhattacharya had said. However, a call on whether the tax should be levied on gross or net valuation was to be taken after further deliberations.
Apart from the GST, crypto investors also pay a 30 percent income tax plus cess and surcharges on earnings from virtual digital asset transactions after such a proposal was announced in the 2022-23 Budget. This came into effect on April 1.
The Budget also proposed a 1 percent TDS on payments towards virtual currencies beyond Rs 10,000 in a year and taxation of such gifts in the hands of the recipient. The threshold limit for TDS would be Rs 50,000 a year for specified persons, which includes individuals/HUFs who are required to get their accounts audited under the I-T Act. The TDS will come into effect from July 1.
Apart from all the taxes, traders also shell out some money as trading fee to exchanges.

Fault lines expand over GST cess

Although the cess will continue, it will be used to pay the sum borrowed by the Centre on behalf of the states during the pandemicWith the GST compensation cess to end in its present form by June, a confrontation between the Centre and the states is looming on reimbursements for anticipated revenue shortfalls.

Although the cess will continue, it will be used to pay the sum borrowed by the Centre on behalf of the states during the pandemic. But the states are expected to insist on compensation beyond June 2022 at the GST Council meeting later this month.

The Centre, on its part, is likely to dangle the carrot of subsuming the cess as part of the GST after 2026.

The states had accepted the GST in 2017 on an assurance by the Centre that they would be given full compensation in the first five years of its introduction, assuming a revenue growth rate of 14 per cent over the base year 2015-16. The compensation is in the form of cess on luxury items and sin goods.

The states are demanding the Centre to continue to compensate them as the revenue buoyancy has not been as promised, while  Covid-19 had a huge impact on revenue collection.

The compensation cess is levied on luxury and sin items such as aerated drinks, pan masala, cigarettes and automobiles over the peak GST rate of 28 per cent. The cess on cars goes up to 22 per cent and is 12 per cent for aerated drinks.

Sources have indicated that the Centre is considering a proposal to subsume the cess into the GST after 2026 to provide for greater revenue to the states.

Analysts said the states are unlikely to buy the argument that shortfalls will be met as tax collections have increased on account of the recovery from the pandemic as is evident from the impressive collections made in April.

The total GST collected in 2021-22, the last financial year, was Rs 14.9 lakh crore, up 31 per cent from 2020-21 and 22 per cent from 2019-20. In fact, collections in the month of April 2022 stood at an all-time high of Rs 1.68 lakh crore.

Apart from inflation, a huge surge in goods imports is a factor behind the massive rise in GST. Goods imports in 2021-22 jumped around 56 per cent to $612 billion. Under GST, imports are deemed inter-state supplies and subject to  integrated GST.

Integrated GST from imports stood at Rs 3.8 lakh crore in 2021-22, around 41 per cent higher than 2019-20. The overall GST in 2021-22 was 22 per cent higher than 2019-20 — a sign that higher imports have pushed up GST collections.

Subsuming the cess into the GST will mean the states will get half of the proceeds as state GST,  in addition to getting 41 per cent of the Centre’s revenue as part of the Finance Commission recommendations.

Analysts said industry would oppose any attempt to subsume cess within GST as they were banking on an end to cess after 2026 that will make their products competitive. Citing judicial announcements, the analysts said courts have held that what cannot be levied directly cannot be levied indirectly: if the cess has served its purpose, it should go.

They said compensation cess is a vexed issue and a long-term solution needs to be found which would be a middle path to meeting the revenue needs of the states, while not significantly hurting industries.