The 50th GST Council meeting was held on 11th July 2023. There were many decisions taken during this meeting. Among all of them, the one which grabbed the most attention was the implementation of the 28% tax rate on online gaming at full face value.
Here’s what the industry experts have to say on GST Council’s decision to tax online gaming at 28% on full face value.
Aaditya Shah, COO of IndiaPlays
The implementation of a 28% 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% tax rate would have been helpful for the gaming industry. Introducing a 28% 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.
RIP – Real money gaming industry in India. If the govt is thinking people will put in ₹100 to play on ₹72 pot entry (28% Gross GST); and if they win ₹54 (after platform fees)- they will pay 30% TDS on that – for which they will get free swimming pool in their living room come…— Ashneer Grover (@Ashneer_Grover) July 11, 2023
RIP – Real money gaming industry in India. If the govt is thinking people will put in ₹100 to play on ₹72 pot entry (28% Gross GST); and if they win ₹54 (after platform fees)- they will pay 30% TDS on that – for which they will get free swimming pool in their living room come the first monsoon – not happening !
It was good fun being part of the fantasy gaming industry – which stands murdered now. $10 Bn down the drain in this monsoon. Time for startups Founders to enter politics and be represented – or this is going to be spate industry after industry.
Malay Kumar Shukla, Secretary, E-Gaming Federation
Games 24×7, Junglee Games, Head Digital Works, etc are members of the federation.
This is an extremely unfortunate decision as charging a 28% tax on full face value will lead to a nearly 1000% increase in taxation and prove catastrophic for the industry. A tax burden where taxes exceed revenues will not only make the online gaming industry unviable but also boost black-market operators at the expense of legitimate tax-paying players, further undermining the industry’s image and capacity to survive. It is in addition to the loss of employment opportunities and the huge impact on marquee investors who are heavily invested in this sunrise sector.
Furthermore, online gaming is different from gambling, and the Supreme Court and various High Court decisions have reaffirmed the status of online skill-based games as legitimate business activity protected as a fundamental right under the Indian constitution. While the industry was quite optimistic with the new developments including amendments to the IT rules and implementation of TDS on net winnings, all this will be moot if the industry is not supported by a progressive GST regime. We will wait for further details to assess the situation and evaluate our approach.
Siddharth Sharma, SVP- Business Strategy, Head Digital Works (A23)
The new tax rate of 28% on Gross Gaming Value is an unexpected move by the GST Council, which will have far-reaching consequences for the industry and question its basic viability. Not only will this burden hinder the growth of this nascent industry, its application will compress new innovation and opportunities. This decision does not take into account the pleas of the industry, global precedents, and even counters the favourable regulatory environment being built up for online gaming in recent months. Businesses have a legitimate concern that this move will push users towards illegitimate betting and gambling operators that don’t follow the laws of the land.