Dr. Ashwani Mahajan
Recently, the GST Council has decided to levy GST on the entire initial amount charged on online real money games. Earlier, GST was levied only on the amount received by these online gaming platforms (by way of their commission), which was only a small fraction of the total amount of bets. However, the proposed GST will not be implemented as of now, as the same can be implemented only after giving effect to this provision in the GST Act.
But, while there is a near-consensus that the addiction to these games is affecting the future of our countless youth, there is intense lobbying by venture funds and companies operating these gaming platforms against the GST Council’s decision. . The argument of these platforms and the venture capital funds that fund them is that the decision will hurt startup platforms operating these games and may even force them go out of the business. This will end the ’employment’ of the people associated with these platforms. He also says that future investments in this area will also be affected not only in terms of online games, but may also affect the overall startup ecosystem. They also argue that this will also hinder incoming foreign investment.
But this is an open secret that the decision to levy 28 per cent GST on online games was not taken for the purpose of revenue. The main reason for this is that millions of youth of the country are getting disoriented due to the addiction to online games and many times due to this addiction they get trapped into the debt to such an extent that they get involved in criminal and other unethical activities, or they even commit suicide. To get rid of this social evil, the government has adopted the route of taxation. To discourage a demerit good, taxing the same at a higher rate is not a new phenomenon. Even before this, taxes have been imposed on cigarettes, tobacco, liquor etc. at the maximum rate, but no objection has ever been registered on such decisions, because the society has understood the importance of higher taxation in discouraging demerit goods, and this is also a responsibility of the government.
The representative of the Finance Ministry says that till now only the effective tax is hardly 2 to 3 per cent on the amount (i.e. bets) placed on these gaming platforms, as the tax is imposed on the GGR of these platforms. Gross gaming revenue, or GGR, is a measure of all the money generated by player losses in a certain time period. Due to this, only Rs 1700 crore revenue was received in the form of GST last year. But now after imposing GST at the rate of 28% on the initial amount, the total revenue from GST is expected to reach at least ten times.
After globalization and the emergence of new technology, a lot of new businesses are taking shape, attracting investments from abroad and from within the country. These businesses are related to the use of technology related to social media apps and platforms, e-commerce, gaming apps, agriculture, mobility, job related platforms, designs and other manufacturing related services and others. Most of these businesses are making our lives easier and bringing efficiency into the system. However, we see that some businesses are becoming socially harmful even while using new age technology. For example, we see that due to some social media apps like Tiktok, youth end up wasting their valuable time, which could have been used more productively. Apart from this, some of these sites indulge in pornography, data breach and many other social evils. With Chinese investment, TikTok had grown in a short span of time to become a $100 billion plus company with most of its business based in India. After it was banned, capital valuation dropped by 90 percent. Similarly, OTT platforms though opening new avenues in the entertainment industry are also becoming the cause of obscenity and many social evils.
Online gaming has almost pushed the youth towards a never ending addiction and most of their youth is being wasted in unproductive activities or even losing money, leading them into debt trap. Interesting aspect of the whole story is that investment is coming from both domestic and foreign sources. Employment is also being created for those who make or run these platforms. This is the time to think, whether this employment is desirable?
Nowadays trading of crypto currency is also attracting our youth in a big way. In the greed of earning quick money, youth had been investing a lot of money in crypto. People’s hard earned money which could have been used for nation building had been going into the black hole of cryptocurrencies in a big way. Then government decided to tax trading of cryptos. As per the provisions so inserted, the gains incurred by trading crypto assets are taxed at a rate of 30% and 4% cess, according to Section 115BBH. While Section 194S states that a 1% TDS will be deducted on the transfer of crypto assets from July 01, 2022. After these provisions, trading in cryptos has come down significantly, saving youth from this menace.
It is time to pause and think whether we need investments and jobs that are detrimental to the interests of our youth. In our growing economy, there are always avenues for job creation in various sectors including industry, services and agriculture. India as a nation has taken a pledge to become Atmanirbhar where we are trying to produce all the items which we had been importing earlier. Various schemes and programs are being launched to achieve this objective. At this time investment is coming in some areas, due to which some youth can get employment.
But the government has to identify those sectors which provide employment to the youth, which add value to the economy by producing goods and services, thereby making our economy go into manufacturing or services like software, manufacturing design, banking, insurance; or new age technologies like drones, AI and automation. Many startups are coming up in the agriculture sector, which are improving the lives of our farmers, helping them in increasing their income. Open Network Digital Commerce (ONDC), a new initiative of the central government, is also gaining momentum, eliminating cash-burning models that are detrimental to job creation. ONDC is also democratizing e-commerce and is eliminating exploitation by sellers and consumers. Huge employment generation opportunities are also available through ONDC. We need to define which jobs are desirable and which are not; and then promote only desirable employment and discourage undesirable employment. In this endeavour we should be making use of all types of measures including tax measures or non tax measures to discourage activities detrimental to social good, and fiscal support by way of cash incentives and tax rebates to promote desirable activities.
(The author is a Professor, PGDAV College, University of Delhi)
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