INDIAN GAMING Gateway to Gaming
The number one source for gaming news for India is Casino International’s excellent partner, Gateway to Gaming.
GST Council imposes 28% tax rate on online gaming and casinos on full face value amount
The much-awaited decision concerning the tax rate for online gaming, casinos and horse racing has been finalized. Online gaming will be taxed at the rate of 28% on full face value amount as decided by the GST Council during its milestone 50th meeting today. The new rate will be implemented after the GST law is amended. Despite the various pleas by the online companies
to levy GST on gross gaming revenue (GGR) the Council has decided otherwise. The same tax rate on full face value will also be levied on casinos and horse racing as announced by Finance Minister Nirmala Sitharaman in the press conference. The FM clarified that there is no intention to
destroy the online gaming industry. Extensive discussions were done during the meeting with suggestions ranging from imposing the lowest to the highest rates on the industry. “The GST Council’s intention is not to hurt the online gaming industry or states with casinos. A few states shared their concerns. But there is a moral question: can we encourage them more than essential goods? So I am proud to say that the GST
Nirmala Sitharaman
Council discussed and understood the matter deeply and took a decision which had been pending for 2-3 years. The issue is very complex,” said Sitharaman. As a result, no distinction has been made between
games of skill and games of chance. However, Maharashtra GST Council member Sudhir Mungantiwar insisted that the differentiation between the two should be made. During the meeting, the Council took note of the
report submitted by the Group of Ministers (GoM). The report was submitted in June 2022 but was given more time to revisit the final tax rate suggestion. Following that, the report was again submitted by
the GoM headed by Meghalaya Chief Minister Conrad Sangma. The report recommended a tax rate of 28% of the consideration, including the contest entry fee. While most of the online gaming firms welcomed the 28% GST rate, they disapproved the tax on the amount including the entry fees and claimed that the decision was not in line with international practices and might end up harming smaller startups. The decision regarding the GST was planned to be
listed in the GST Council meeting in December 2022. Unfortunately, the discussion was postponed to the 49th meeting in February 2023, and further postponed for the 50th meeting this month. In between this, the Ministry of Electronics and Information Technology (MeitY) announced amendments to online gaming rules. The convenor of the GoM Conrad Sangma states
in the report that the GST may may be levied only on the GGR in case of casinos and horse racing. For online gaming an escrow account can be created wherein the prize money that needs to be paid out to the winners can be segregated from the platform fee and pooled for easy tax administration.
Online gaming companies write to govt to reconsider 28% GST
As many as 127 gaming startups and industry bodies have addressed an open letter to the government requesting to reconsider the GST rate for online gaming. Reportedly, the online gaming industry with a valuation of $20 billion is set to grow at a rate of 30% CAGR by 2025. Notably, there are more than 420 million gamers in India. In the letter, the gaming
companies mentioned that a 28% GST will not only halter the growth, but will also result in over one million job losses in the sector. In industry’s words, the decision will “reverse the growth trajectory” and can have “devastating implications” to startups without sufficient capital reserves. Not only the tax rate was increased, the online
real money gaming was clubbed together with betting and gambling industry. The letter also argued that this decision will also lead player using
24 AUGUST 2023
illegal offshore gambling companies. As revealed by The Arc, the letter lists some major
points that reveal the adverse effect the GST Council’s decision will have moving forward. Firstly, the letter claims that the mentioned changes aren’t in sync with the “Digital India” and “Make in India” policy. Moreover, these changes severely hurt gaming startups, as they will have four to five times increase in taxation burden, thereby making matters worse for smaller companies. As the companies will need to cut
expenses to survive under the new tax rate,
their employees might experience lay-offs. This might increase the unemployment rates in the country. Even after cutting corners, the tax burden will be shifted to players, resulting in increased cost of playing. The shift of tax burden will ultimately lead to
players leaving legal platforms due to diminishing returns. Many of them will shift towards illegal offshore websites that do not pay
taxes and are financially harmful for them. Further, pointing out about the gaming industry, the
letter says that even with only one percent of the gaming market share, India has the highest game downloads than any other country, making it possible to become a gaming hub. But with increase in GST, the goal, unfortunately, might not be achieved. This will also lead to end of new startups and ultimately decrease the tax revenue. Lastly, the letter claimed that the gaming
companies end the note saying that they support the decision, however if the gaming sector is to survive, the tax rate should be levied on the gross gaming revenue (GGR). Taxing on GGR will also encourage foreign investor to invest in new gaming startups that will allow the county to compete globally. While the gaming industry has opined regarding
its take on GST Council’s decision, it remains to be seen if the authority will ever reconsider its decision to revise the tax rates on online gaming in the coming time.
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56
