Industry Dismayed by GST Council’s Decision to Impose 28% Tax on Online Gaming

The 50th meeting of the Goods and Services Tax (GST) Council has decided to impose a 28% GST on the entire face value of online gaming. However, the gaming community, who had been anticipating this decision, views it as a disadvantage.

Finance Minister Nirmala Sitharaman stated at a press conference that online gaming, horse racing and casinos will be taxed at 28 percent. There will be some changes in the GST Act to include online gaming, he added.

However, Roland Landers, CEO of The All India Gaming Federation, stated that the GST Council’s decision was “unconstitutional, irrational and outrageous” and that it ignored over 60 years of settled case law and conflated online skill gaming with gambling. .

He also said that this decision would wipe out the entire Indian gaming industry and lead to lakhs of job losses. The only people who benefit from this are the anti-national illegal offshore platforms, he added.

“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 unsustainable decision has been taken which ignores the views of most of the GoM states that have studied this issue. We hope that the government will consider this recommendation again and not implement it because it’s catastrophic for the prime minister’s dream of a $1 trillion economy,” Landers said.

Fantasy Sports Federation of India CEO Joy Bhattacharjya has also called it a “disappointing” decision. “Changing the value to taxation from the total price will cause irreversible damage to the industry, loss of revenue to the government and loss of employment to engineers skilled in the law. Needless to say, this decision will have a chilling effect on the USD 2.5 billion in FDI already invested by investors and potentially jeopardize new FDI in the industry. Furthermore this decision diverts users to illegal betting platforms, resulting in user risk and loss of revenue to the government. We humbly request the GST Council and the Government of India to reconsider this decision,” he said.

Amrit Kiran Singh, strategic advisor to the founders of Gameskraft, said the decision undoes all the good work the central government has done to support the Skilled Online Gaming (SOG) industry: appointing MeitY as the nodal ministry for this sector and announcing the rules. who now dominate the industry, enabling formation of Self Regulatory Bodies (SRBs) to regulate the industry, correct ambiguities in TDS rules, etc.

“The decision is not in the national interest as it destroys a significant part of the successful companies in India’s startup ecosystem. Unfortunately, it also seems to show that different parts of the government are out of sync,” he said.

Singh pointed out that the sector has created more than 2 million jobs. India has only 1% of the global market, but this can easily grow to 5% and 10% quickly as the country becomes an IT powerhouse, while the US and China are the market leaders at 23% and China at 25%, he said. .

“This is a borderless industry and excessive taxation in India will only further the cause of foreign gaming companies and encourage the Indian industry to move abroad,” Singh stated.

Malay Kumar Shukla, secretary of the E-Gaming Federation, said the tax burden, where taxes exceed revenue, not only makes the online gaming industry unviable, but also increases black market players at the expense of legitimate tax payers, further tarnishing the industry’s image. and the ability to survive.

“Online gaming is different from gambling and the Supreme Court and several High Court judgments have upheld the status of online gaming as a legitimate business protected as a fundamental right under the Constitution of India. While the industry was quite optimistic about new developments, including changes in IT rules and introduction of TDS on net profits, all this is moot if the industry is not supported by a progressive GST regime,” he added.

Shivani Jha, technical policy lawyer and head of EPWA, told ReturnByte that with so many regulatory and legal developments in the industry, it seemed obvious that the GST Council would not tax players the same way as players.

“This development shows an increase from Rs 1.8 per Rs 100 per game to Rs 28 per Rs 100. This not only discourages players from playing, but the professionals for whom it is a livelihood will also face the burden of taxation. It may also force them to play offshore platforms, and the whole vision of creating a digital progressive gaming ecosystem seems unclear at this point,” he said.

The Minister of Finance said at his press conference that the effects and revenue generation of the online gaming industry have been discussed. “Our agenda is not to destroy the industry at all,” he added.

He cited the examples of Sikkim and Goa, where casinos are a big part of the tourism attraction, and said there is a detailed discussion on how to ensure that taxation does not affect tourism in those states or similar industries.

“It is not our intention to destroy any of these industries, be it casinos, horse racing or online gaming. But all of these have become complicated. It is impossible to pierce the veil that makes its actual use opaque. So there should be a simplified system, Sitharaman pointed out.