What Will be Effect of 35% GST on Common Man
India’s taxation system recently witnessed a significant shift with the introduction of 35% Goods and Services Tax (GST) on certain activities like online gaming, casinos, and horse racing. While the government justifies this move as a revenue booster, the implications for the common man are far-reaching and deserve close scrutiny.
In this blog, we’ll break down what this tax entails, why it has been introduced, and how it could affect the everyday lives of Indian citizens.
The Goods and Services Tax (GST) is a comprehensive indirect tax that replaced multiple taxes levied by the central and state governments. It was designed to simplify the taxation process and ensure transparency.
However, the recent decision to impose 35% GST on activities like online gaming, casinos, and horse racing has raised eyebrows. This steep tax rate is among the highest in India’s GST structure and is aimed at activities that are often considered “luxury” or “non-essential.” The rationale is to:
- Increase government revenue – High taxes on these sectors could potentially bring in significant income for the government.
- Discourage speculative spending – Activities like gambling and gaming often carry a stigma of being addictive or non-productive. Higher taxes could serve as a deterrent.
- Regulate the industry – By taxing these sectors heavily, the government aims to exercise more control over them.
But how does this affect the common man? Let’s explore.
1. Increased Financial Burden
For millions of Indians, online gaming and horse racing are not just forms of entertainment; they are also sources of income. Professional gamers, esports enthusiasts, and even casual players rely on these platforms for monetary rewards. A 35% GST will significantly reduce their earnings, as a substantial chunk will now go toward taxes.
For the average person who participates in these activities recreationally, the higher costs may lead to tighter budgets and reduced disposable income.
2. Entertainment Becomes Costlier
Online gaming has become a popular pastime in India, especially among the youth. With affordable smartphones and cheaper internet access, gaming has become a common hobby even in rural areas. However, with the 35% GST, companies are likely to pass on the tax burden to consumers by increasing subscription fees, in-app purchases, and participation costs.
This could make gaming and other such activities unaffordable for a large section of the population, depriving them of affordable entertainment.
3. Job Losses in the Industry
The online gaming and betting industries have witnessed explosive growth in recent years, creating thousands of jobs in fields like technology, content creation, marketing, and more. The high GST rate could stifle this growth, as smaller companies may struggle to survive under the new tax regime.
Job losses in these sectors would add to the existing unemployment problem in the country, indirectly affecting families that depend on these incomes.
4. Ripple Effect on Related Sectors
The high tax rate is not just limited to gaming platforms or casinos. It impacts related industries like technology, advertising, and event management. For example, companies that organize gaming tournaments or promote online gaming platforms may face reduced budgets, affecting their operations and workforce.
Is the Common Man Truly Affected?
Critics argue that activities like online gaming, casinos, and horse racing are not essential for the common man and, therefore, taxing them heavily does not directly impact the majority of Indians. However, this view overlooks a few key points:
- Accessibility of Gaming: Online gaming is no longer just a luxury for the elite. With smartphones in every hand, it has become a go-to form of entertainment for many, including people from middle and lower-income groups.
- Socioeconomic Divide: The tax could widen the gap between those who can afford leisure activities and those who cannot, further deepening socioeconomic inequalities.
Government’s Perspective
From the government’s point of view, the 35% GST is a well-intentioned move. It seeks to:
- Boost Tax Revenue: With a growing digital economy, taxing online gaming and betting platforms is seen as a lucrative opportunity.
- Curb Addiction: High taxes might deter excessive participation in gambling-like activities, reducing potential financial and social harms.
- Regulate an Unorganized Sector: Online gaming and betting often operate in grey areas, making regulation and taxation essential for better oversight.
Way Forward: Balancing Growth and Taxation
The key challenge lies in balancing the need for revenue with the industry’s growth and its impact on the common man. Here are some possible steps the government could take:
- Differential Taxation: Instead of a blanket 35% GST, the government could introduce differential rates based on the nature of the game (skill-based vs chance-based).
- Incentives for Local Developers: To promote Indian gaming companies, the government could offer tax breaks or subsidies, ensuring the industry remains competitive.
- Public Awareness: Educating citizens about responsible gaming and financial planning could help reduce the negative effects of gambling-like activities.
Conclusion
The 35% GST on online gaming, casinos, and horse racing is a bold move that aims to generate revenue and regulate an expanding sector. However, its implications for the common man are significant and cannot be ignored.
While it may deter excessive spending in these areas, it also risks making entertainment unaffordable, stifling industry growth, and increasing the financial burden on individuals who rely on these platforms for income or recreation.
As India’s digital economy continues to grow, it is crucial for policymakers to adopt a balanced approach that supports innovation, ensures fair taxation, and minimizes the impact on everyday citizens.
What are your thoughts on this new tax regime? Is it a necessary step or an unfair burden? Share your views in the comments below!
