At its 50th meeting in New Delhi, the Goods and Services Tax (GST) Council decided to impose a 28 per cent GST on all online gaming, horse racing and casinos.
The council debated whether to apply a 28 per cent GST on platform fees alone, gross gaming revenue, or the face value of bets and ultimately decided to tax the turnover.
In the post-GST council meeting, Union finance minister Nirmala Sitharaman was questioned if the government wants to discourage e-gaming due to its adverse impact on kids. According to the finance minister, the council doesn’t want to put a stop to any industry, but they also don’t want to send a wrong message to the public by reducing the tax rate on these sectors to that of essentials.
Without making any distinctions based on whether the games involve skills or are based on chance, a tax on online gaming would be imposed.
“We are not looking at a game if it is skill-based, chance-based or both, we are purely looking at the value it generates that can be taxed,” said Sitharaman.
Sitharaman added, “Very substantive discussions took place on online gaming. MeitY is likely to provide a list of an inclusion or exclusion list of games. Our position is clearly on taxation. We will still align it with MeitY’s rules.”
Here’s what the industry stakeholders have to say about this decision:
The All India Gaming Federation CEO Roland Landers said, “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.
This decision will wipe out the entire Indian gaming industry and lead to lakhs of job losses and the only people benefitting from this will be anti-national illegal offshore platforms.
It is very unfortunate that when the central government has been supporting the industry – in terms of online gaming rules, clarity on TDS, etc such a legally untenable decision has been taken, ignoring the views of most GoM states who studied this matter in detail.
We hope that the Government will reconsider this recommendation and not implement it, as it will be catastrophic for the one trillion dollar digit economy dream of the Hon’ble PM.”
IndiaPlays COO Aaditya Shah said, “The implementation of a 28 per cent tax rate will bring significant challenges to the gaming industry. This 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; a levy of an 18 per cent tax rate would have been helpful for the gaming industry. Introducing a 28 per cent tax rate not only hampers online gaming platforms’ capacity to develop new games and technologies but also undermines their competitiveness in the market. Moreover, the constrained financial resources hinder their ability to enter new markets and reach a wider customer base.
It is now important for the industry to adapt and explore creative solutions to navigate these challenges while striving for sustained growth. By fostering an environment that encourages innovation, collaboration, and strategic resource allocation, we can address the hurdles posed by the tax rate and ensure the long-term success and prosperity of the gaming sector.”
Alpha Zegus founder and director Rohit Agarwal said, “Yet again, esports being included in the same domain as online gaming, horse racing and casino, has put our industry at a major disadvantage. While the government might have fair reasons to impose higher GST on horse racing and casino winnings, imposing the same rules on an industry like esports doesn’t seem fair. Esports does not only have a ‘win or lose’ situation basis luck but has a very big element of skill that determines the outcome of the game. This is not what I expected, and our fight to separate esports from other labels still continues.”
Lakshmikumaran & Sridharan Attorneys executive partner L. Badri Narayan said, “This is an unexpected development for the industry in the light of the positive steps in TDS and self-regulatory regime. After taxing 100 per cent of the winning amount under the new TDS regime, taxing the full value of the entry fee will have a significant impact on the prize pool and incentive for players. The differential treatment for games of chance like casino and games of skill played in online gaming is arbitrary and will face legal challenges. This decision will have an adverse impact on the nascent sector and future investments. As highlighted by GST Council, this will aid in the further development of grey market operators and the dark web affecting customer interest. The approach of the GST Council is a deviation from internationally accepted taxation practice.”
Qlan co-founder and CEO Sagar Nair said, “The decision of the GST council to impose a 28 per cent tax will have a significant impact on the online gaming industry, which unfortunately includes the esports community. While we understand that the government needs to impose such measures on casinos, horse racing, and gambling, the higher tax rate is not justified for the competitive gaming community. It can discourage new players from entering the market as their hard-earned earnings generated through their efforts just like mainstream athletes will be taxed on the same level as those involved in gambling and other such practices. For the esports industry to continue its unprecedented growth and recognition on the international stage, it is vital for the government to treat esports as a separate category with reasonable tax rates that would support the development of the sector.”
Will the legislation in the future, acknowledge that money won from online gaming is not a mere matter of chance but the gamer’s skill and there should be a clear distinction between online gaming on one hand and lottery, betting, gambling and casino on the other? That is for the industry to see.
