Monday, June 27, 2022

Why is Gaming not being brought under GST?

About 20 years ago I was invited to attend a technology conference in Las Vegas. I must admit I was terribly jet-lagged because of winter delays ex-Delhi which caused re-routing and switching airlines. Las Vegas struck me as a particularly plastic and neon kind of city, as I tumbled off the American flag carrier I had been bundled onto, which was another reason for me to go straight to my room and fall asleep.

When I woke up and stumbled down for an early breakfast, I found myself near an early morning session which promised to teach people about the psychology of gambling, and the then early days of online gambling. With nothing better to do since my colleagues from other parts of the world were possibly sleeping off the hangovers from their previous night out on the tiles, I walked in.

Amongst the best educations I received in my life on a subject I had been interested in ever since a more experienced Master and Chief Officer banned me from going ashore in Japan again, after I had won a lot in a casino there on my first outing. After that, in my tech life, since we were making technology for casinos, we were in any case banned from going on the floors when on work visits – so all I knew about gambling was from home teen-patti sessions.

I learnt many things that day to an extent that I stopped eating breakfast and just absorbed the knowledge and also huge mugs of strong black coffee – encouraged by a wise Japanese man seated next to me who suggested I replace the bakery carbs with fresh citrus fruits instead.

  1. Gambling accounted for anything between 2% and 8% of Gross Domestic Product, games of skill as well as of chance, in countries where they were legalised. Much of this about 20 years ago was on brick and mortar, but predictions were that both would soon be hugely online, and the technology required for the mechanisms for cash management would then be huge.
  2. Where gambling (also known as gaming, since it included both categories – games of chance and games of skill) was illegal, the margins for the “house” (operator) were much higher. This gap needed to be filled by the organised gambling operators, and a special mention was reserved for China and India in this context. 
  3. The basics of margins for the operators centred around how many zeroes there were on a roulette wheel and how many jokers there were in a pack of cards. A mention was made of the “matka” games of India in this context. At its simplest, the operator’s margin on a bet on a single card with a 50:1 payoff on a 52 card pack increased from 4% to 11% if all 3 jokers were added to make it 55.
  4. Societies that faced natural or man-made disasters saw a huge up-tick in gambling with larger margins for the operators. The reason for this, and a reference to India again, was deeply embedded in our spiritualities. “We will not take anything with us” being the primary one-liner, along with the bodily reflex that to enjoy this life, one needed to show that they were enjoying losing. Donating to the new Gods made of plastic and neon.

Which then explained the plastic and the neon from the moment you landed at McCarran. The Gods of Las Vegas.

Today we see in India that to help counter rising prices and increase revenues, the GST Council is getting ready to increase the taxes on basics like papad and jaggery (gud). 

(Side note – there is no GST on almost all meat, by the way, maybe it is because one particular community appears to have the monopoly on the trade?) But why is gambling, whether called gaming, games of chance or games of skill, not being brought under GST?

And that brings me to the 5th point which I took away from that conference. Going forward, the money laundry part of the gaming businesses would require huge participation by banks and MNCs, because the profits from countries where gaming is illegal, will need to move abroad – and at the end of the day – they call the shots in the world. 

If (controlled) gaming was legal in India, which our tech companies would certainly be good at, the turnover, profits and losses would pass through and also probably if we play smart, remain in India. And that would be between 2% and 8% of the GDPs of other countries moving to India, if the example of the European Union itself is taken as a broad marker.

I am not coming from a moral point of view here. My point of view is purely fiduciary. The money movement exists, and the profits all go abroad, simple as that. That they show as a plus in some other country’s GDP while showing up as a huge negative in India’s, is what I understand needs to be taken forward and solved. 

Today, as the West, meaning Europe, rapidly moves into a war zone where the leading Capital Cities of Europe are all within 1000 to 1500 kms of the Ukraine border, it is clear that old nomenclatures like “post Soviet Europe” or “erstwhile Eastern Europe” mean nothing. Everything is a small continent which stole from the rest of the world for centuries. Now collapsing. 

Do take a look at the distances between Western European countries and Ukraine.

Ukraine to Austria – 560kms (Delhi to Lucknow)

Ukraine to Germany – 650kms (Delhi to Udaipur)

Ukraine to France – 1210kms (Mumbai to Kanpur)

Ukraine to Italy – 835kms (Puducherry Beach-French to Marmagao Sada Headlands (Portugese)

Key West Florida to Havana – 160kms (New Delhi Railway Station to Mathura Junction)

If we are hesitant to legitimise gaming in India, fair enough – but the technology to control the financial and fiduciary parts of global gaming certainly exist in India. And that is a huge taxable basket, waiting to be tapped into – not just increasing the GST on papad and gud (jaggery). Or coffee.

(Veeresh Malik was a seafarer. And a lot more besides. A decade in facial biometrics, which took him into the world of finance, gaming, preventive defence and money laundering before the subliminal mind management technology blew his brains out. His romance with the media endures since 1994, duly responded by Outlook, among others.)

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