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Surge in GST Collections from Online Gaming Signals Growth in Sector

3rd February, 2024| By Business Desk
GST-Bhavan
GST-Bhavan | Credit: Wikimedia Commons
  • Online gaming GST collections have experienced a remarkable 400% surge, averaging Rs 1,200 crore per month since the introduction of the new regime on October 1, 2023, indicating robust growth in the sector.
  • Prior to the new GST framework, the online gaming sector contributed only Rs 220 crore per month in GST, highlighting the substantial impact of the revised tax rates on entry-level bets for online gaming, casinos, and horse racing.
  • The reduction in customs duty on mobile phone components from 15% to 10%, announced just before the Budget, aims to resolve disputes related to rate classification and promote domestic manufacturing, receiving positive feedback from the industry.
  • Sanjay Kumar Agarwal, Chairman of the Central Board of Indirect Taxes and Customs, clarified that the customs duty adjustment was not part of the Budget but addressed issues surrounding rate classification discrepancies within the mobile phone component sector.
  • Agarwal emphasized the provisional nature of the Interim Budget, hinting at potential customs duty reviews and adjustments in the full Budget scheduled for July, as numerous notifications are set to expire on March 31, 2024, and have been extended to September 30, 2024.

In a recent interview following the presentation of the Interim Budget, Sanjay Kumar Agarwal, Chairman of the Central Board of Indirect Taxes and Customs, disclosed a remarkable surge in Goods and Services Tax (GST) collections from online gaming. The collections have witnessed an astounding 400% increase, reaching an average of Rs 1,200 crore per month since the implementation of the new GST regime on October 1, 2023. Previously, the sector contributed a modest Rs 220 crore per month in GST.

Agarwal emphasized the substantial growth in GST revenue, attributing it to the thriving performance of online gaming companies. Under the revised GST framework, online gaming, casinos, and horse racing now incur a 28% GST on entry-level bets.

In addition to this significant development, Agarwal addressed the reduction in customs duty on mobile phone components. Contrary to being a component of the Budget, the decision aimed at resolving disputes related to rate classification and rationalizing rates within the industry.

Explaining the rationale behind the customs duty adjustment, Agarwal clarified that disputes had arisen over the classification of various mobile parts. While some components, such as display assembly, were subject to a 10% duty, others were taxed at 15%. To mitigate these classification disputes and streamline rates, a notification was issued. The move, reducing the customs duty on mobile phone components from 15% to 10%, has been positively received by the industry and is anticipated to boost domestic manufacturing.

Addressing the anticipation of further customs duty adjustments, Agarwal emphasized the provisional nature of the Interim Budget. Line ministries regularly propose modifications to customs duty notifications, often with conditional clauses and expiration dates. Many of these notifications are set to expire on March 31, 2024, and have been extended to September 30, 2024. Agarwal hinted that a comprehensive review and potential adjustments could be expected in the full Budget scheduled for July.

The surge in GST collections from online gaming stands out as a significant economic indicator, reflecting the robust growth and prosperity of the sector. The shift in tax rates on entry-level bets for online gaming, casinos, and horse racing under the new GST regime has evidently contributed to this substantial increase in revenue. This development underscores the resilience and dynamism of the online gaming industry, as it not only sustains its economic viability but also significantly contributes to government revenue.

Turning to the customs duty adjustments in the mobile phone component sector, Agarwal clarified that the move was driven by the need to address disputes arising from inconsistent rate classifications. The reduction from 15% to 10% aims to create a more uniform and simplified tax structure for mobile phone parts, promoting clarity and stability within the industry. This adjustment is particularly relevant in the context of supporting domestic manufacturing, aligning with broader economic objectives.

As the industry welcomes the reduced customs duty, it is evident that the government is actively engaged in creating a business-friendly environment and addressing concerns within specific sectors. The move not only resolves existing disputes but also lays the foundation for a more transparent and predictable taxation structure. This clarity is crucial for businesses to make informed decisions and plan their operations effectively.

Agarwal’s clarification on the provisional nature of the Interim Budget sheds light on the ongoing dynamic nature of customs duty notifications. The possibility of further adjustments and reviews in the full Budget signals the government’s commitment to adapting its fiscal policies in response to evolving economic conditions and industry requirements.

In conclusion, the noteworthy surge in GST collections from online gaming, coupled with the customs duty adjustments in the mobile phone component sector, reflects a proactive approach by the government in fostering economic growth and resolving industry-specific challenges. The coming months, leading up to the full Budget in July, will be crucial in assessing the long-term impact of these measures on the respective sectors and the overall economic landscape.