And silver lining? How few sectors are expected to benefit from the GST Council recommendation on waiving interest and penalties for demand notices – Brand Wagon News

Sectors that benefited

The insurance market in India is expected to reach $222 billion by 2026, as per India Brand Equity Foundation. The insurance sector has attracted substantial foreign direct investment amounting to nearly $6.5 billion (Rs 54,000 crore), driven by the government’s progressive relaxation of overseas capital flow regulations. The insurance industry of India has 57 insurance companies – 24 are in the life insurance business, while 34 are non-life insurers. Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company, stated the report. One of the old sectors in India, the insurance industry over a period of time has complied with all taxation norms, industry experts opine that this is also the reason for the government to take such a step. “There is no one that fits all is the formula followed by the insurance sector. For example, in the case of motor insurance, it is largely about the no claim bonus and this is why consumers tend to stick with service providers. Not to mention in the case of four-wheelers and two-wheelers, value always depreciates. While in the case of term insurance (life insurance) only a few avail with a thought process that this will be never claimed,” Anisha Motwani, founder,

STORM the NORM Ventures, said.

Moreover, as for ULIP and other products which are purely based on return, these are agents punched products as consumer knowledge about these are very limited. Health insurance is the place, which is heavily inflated, as post the pandemic everyone has realised its importance, and add to that new kinds of diseases. Industry experts opine that in the case of such products cashless claims bundled with OPD service makes a huge difference. Among the new age businesses, the council has extended the same provision to food-delivery apps such as Swiggy and Zomato. As per industry sources and estimates, the total amount expected to be waived in the case of food-delivery apps is Rs 751 crore. “Services are provided by individual delivery partners and not by the food-tech company. In this case, the platform is acting like an intermediary. “This claim is the reason for food-tech companies receiving the waiver,” said a senior tax lawyer, on the condition of anonymity.

The status now

The online gaming industry from October 1, 2023, following a recommendation in the 51st GST Council meeting, is paying a GST rate of 28% on the total money deposited with the

platforms. As per the government data, the online gaming industry has already exceeded Rs 3,500 crore in terms of GST collection, in the October-December quarter. Moreover, in a statement to Reuters (a news agency), in February this year, the revenue secretary had stated that the government expects to collect up to Rs 14,000 crore ($1.7 billion) in GST by next year from the online gaming industry. “Currently, online gaming companies are paying taxes from their own pocket, so there is no impact on users. The day they start shifting this burden to players, the industry will witness a huge drop in player engagements. Users have the option to play offshore games where no tax amount is charged, they usually don’t care about the legality of the platform. Users are still fine with 30% tax deduction at source (TDS) on net winnings, but not with the 28% GST on deposits because it reduces the amount in the wallet which is used to play tournaments or contests,” a senior lawyer said, on the condition of anonymity.

The total revenue of the online gaming industry stood at Rs 18,100 crore in 2022, which grew year on year to Rs 22,000 crore in 2023, as per the recent EY report. It is notable that in 2023, the revenue of the money gaming sector accounted for Rs 18,200 crore while that of the other sub-sectors accounted for Rs 3,800 crore. The industry is further expected to grow at a compound annual growth rate (CAGR) of 21% to reach Rs 38,800 crore by 2026.

As part of creating new revenue streams, online gaming companies are now setting foot into international markets, besides investing in game studios. One of the looming issues faced by the industry is regulation of off-shore betting companies. Citing the example of how the Indian government handled the e-commerce sector, experts opine that once the online gaming industry is able to prove itself, maybe the government will take a relook at it. “The Indian government made the same mistake with e-commerce too. It took so long for them to understand the e-commerce sector and now with the desired level of clarity in place, we are one of the leading e-commerce industries in the world. We just need to be bold and fast and make sure the level playing field for all gaming ecosystem players is achieved with clarity of regulation,” Sreedhar Prasad, start-up advisor and former partner at KPMG, said.

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