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The GST Council on Tuesday decided to levy 28 per cent tax on online gaming, horse racing and casinos, a move industry stakeholders say will deal a killer blow to the burgeoning online gaming sector in the country.
The decision was taken at the 50th Goods and Service Tax (GST) Council meeting.
Industry stakeholders, including gaming companies and industry bodies, expressed discontentment, saying it will deal a debilitating blow to the burgeoning online gaming sector in India.
Before the decision, online betting and gambling was taxed at 28 per cent, while 18 per cent GST was applicable to the gross gaming revenue (GGR) of online games. The new tax will apply to the total amount of money deposited by players.
“We believe this decision by the GST Council is unconstitutional, irrational, and egregious. The decision ignores over 60 years of settled legal jurisprudence and lumps online skill gaming with gambling activities,” said Roland Landers, CEO, All India Gaming Federation (AIGF) – one of the largest industry bodies for online gaming in India.
This decision, Landers says, will wipe out the entire Indian gaming industry and lead to lakhs of job losses, while the only beneficiaries would be “anti-national illegal offshore platforms.”
“It is unfortunate that when the Central Government has been supporting the industry – in terms of online gaming rules, clarity on TDS –such a legally untenable decision has been taken, ignoring the views of most GoM states who studied this matter in detail,” Landers said.
The GoM, convened by Meghalaya Chief Minister Conrad Sangma, includes finance ministers from the eight states of West Bengal, Goa, Uttar Pradesh, Telangana, Tamil Nadu, Gujarat and Maharashtra.
In its previous report submitted by Sangma in December last year, a 28 per cent GST on the total prize pool, including the platform fee, was proposed. However, a consensus could not be achieved after Goa suggested that an 18 per cent tax should be levied on just the platform fee.
Malay Kumar Shukla, Secretary, E-Gaming Federation, says that charging a 28 per cent tax on the full face value will lead to a nearly 1000 per cent increase in taxation and prove catastrophic for the industry.
Kishore Kumar, Lead, Indirect Tax, Taxmann says that the blanket proposal to levy GST on full face value on online gaming will possibly put an end to the sub-judice debate of ‘game of skill’ vs ‘game of chance. “This change will bring games of skill at par with wagering contracts which are in the nature of gambling and betting,” he says.
Bhavin Pandya, co-founder and co-CEO, Games24x7 – a gaming unicorn (company valued over $1 billion) says that 28 per cent a tax on the Contest Entry Amount (CEA) as opposed to Gross Gaming Revenue would create a hostile environment for legitimate domestic platforms, driving consumers towards offshore and illegal platforms that pay no taxes.
“(A) change in the valuation to tax on the total consideration will cause irreversible damage to the industry, loss of revenue to the exchequer and loss of employment for lakhs of skilled engineers. Needless to add, this decision will have a chilling effect on the $2.5 billion of FDI already invested by investors and potentially jeopardise any further FDI in the sector,” Joy Bhattacharjya, Director-General of the Federation of Indian Fantasy Sports (FIFS) said.
Aaditya Shah, COO, IndiaPlays – a multi-gaming platform, said the higher tax burden will impact companies’ cash flows, limiting their ability to invest in innovation, research, and business expansion.
“There is a fine line between skill-based games and casinos/betting apps, and they must not be treated the same way,” he added.
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