An in-depth study conducted on the impact of GST on online gamers in India has shed light on a concerning issue: heavy tax deduction on online gaming winnings. The study, which involved the participation of 11,000 gamers, reveals that 62% of players are discouraged by the substantial tax deduction imposed on their winnings. This deduction has become a major cause of concern for gamers who invest their time, skills, and effort in these games, expecting reasonable deductions on their winnings. Surprisingly, a significant number of respondents were not even aware of the tax levied on their winnings, indicating a lack of awareness and understanding of their tax obligations.
EPWA, short for Egamers and Players Welfare Association, is a non-profit section 8 company registered in New Delhi. It was incorporated in 2021 and currently has around 15,000 members across India. EPWA is a membership-based players’ collective organization that works towards solving problems faced by skill-based online gamers in India. It comprises a board of advisors and volunteers dedicated to the welfare of online gamers.
The Sensitivity to Tax Burden
The survey findings indicate that 60% of players expressed their likelihood to stop playing online games if a 30% tax deduction were to be imposed on their winnings. This highlights the sensitivity of players to tax burdens and the potential consequences that heavy tax deductions can have on their gaming experiences. It is crucial to address this issue as the Indian online gaming industry has the potential to create millions of jobs and support the economy. The survey concludes that 61 out of 100 online gamers would refrain from playing if the tax burden continues to increase.
Gamers participating in the survey expressed a strong sentiment that professional gaming should be treated differently from traditional forms of gambling and betting when it comes to taxation. They argue that professional gaming requires a high level of skill, strategy, and dedication, much like any other professional sport. It involves hours of practice, honing skills, and mastering game mechanics to compete at the highest level.
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The Burden on Gaming Companies
It is important to note that higher GST rates will increase the burden on online gaming companies to collect taxes indirectly from the players, which will then be deposited by the gaming companies themselves. This leaves gaming companies with two choices: imposing taxes on gamers or bearing the burden themselves. The proposed changes in tax rates will significantly increase the financial burden on the gaming industry, as they will become liable to pay taxes on portions of money that do not contribute to generating revenue for these companies.
Demographic Insights and Recommendations
The study also provides valuable demographic insights into the interests of online gamers. The findings reveal that the age group of 20-29 is more engaged in playing online games, with a higher dominance of male players than females. Recommendations stemming from the study emphasize the need for authorities to refrain from charging GST on the entire money and instead focus on taxing the Gross Gaming Revenue (GGR) only.
Additionally, the legislation should recognize that money won from online gaming is a result of skill, not chance, and there should be a clear distinction between online gaming and other forms of gambling and betting. The report also suggests that policymakers should consider the Information Technology Act and related rules to remove constraints and differentiate online gaming from other forms of gambling and casino activities.
Supporting the Growth of Online Gamers
To support the growth and development of online gamers, policymakers should refrain from imposing hefty taxes on online gaming. It is important to acknowledge that gaming companies and online gamers invest significant human capital to generate revenue. Innovation is at the core of online gaming, with companies investing in developing user-friendly and captivating games that provide gamers with a realistic experience. The only viable way to generate revenue for these companies is through the platform fee charged to players.
The study on the impact of heavy tax deductions on online gaming winnings highlights the concerns of 11,000 gamers in India. The findings reveal that substantial tax deductions discourage players and can lead to a decline in the popularity of online skill-based gaming. Policymakers need to address these concerns, considering the potential impact on the economy, employment opportunities, foreign direct investment, and ancillary industries. By adopting the recommended measures, authorities can create a conducive environment for the growth and development of the online gaming industry.
