On November 29, the Uttar Pradesh (UP) state assembly took a significant step in regulating the online gaming industry by passing a bill that imposes a 28% Goods and Services Tax (GST) on the full face value of activities such as online gaming (real money), casinos, and horse racing. This legislative move, chaired by State Finance Minister Suresh Khanna, reflects an ongoing discourse regarding the classification of these activities as games of chance or skill.
The updated GST rate came into effect on October 1, but several states have not yet fully implemented it. Due to the absence of assembly sessions, many states opted for promptly issuing ordinances. Gradually, states are now proceeding to pass the bill individually.
Minister Khanna, while presenting the bill, argued that online gaming, casinos, lottery, and horse racing should be recognized as games of chance, aligning his stance with a Supreme Court ruling that categorises them as skill-based. During the assembly discussions, Member of Legislative Assembly (MLA) Samar Pal expressed a more stringent view, advocating for a complete ban on the online gaming industry due to its perceived negative impact on successive generations, reported TOI.
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Crucially, Minister Khanna resisted the call for an outright ban, emphasising the industry’s rapid growth and popularity, particularly among the youth. He disclosed that approximately 14 crore people in the country are involved in the online gaming industry. Instead of prohibition, the UP government aims to address the concerns through effective measures, including the imposition of a higher tax. This approach is seen as a more pragmatic way to regulate and discourage the industry while allowing it to continue its operations.
The Minister underscored the distinction between games of skill and chance, pointing out that the past Gross Gaming Revenue (GGR) tax had vulnerabilities to manipulation by promoters or service providers. To counter this, the new regulation mandates that promoters and their agents register with the government, adding a layer of oversight to the industry.
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This development builds on a government ordinance issued two months earlier, which had already increased the tax on the online gaming industry from 18% to 28%. The ordinance was implemented as a response to the Centre’s directive to impose the higher tax from October 1, and it was issued since the state assembly was not in session at that time.
Notably, Uttar Pradesh now joins the ranks of 21 states, including Maharashtra, Karnataka, and Madhya Pradesh, that have passed legislation to regulate the online gaming industry, while others have issued ordinances for the same purpose.
In the face of differing opinions within the assembly, Minister Khanna’s stance reflects a balance between acknowledging the concerns associated with online gaming and recognizing its widespread popularity. The imposition of a higher tax and the registration requirement for promoters signal a proactive effort by the government to address the challenges posed by the online gaming industry while avoiding a complete ban.
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