"Body blow": Online gaming industry in uproar as GST Council slaps 28% tax on bets
The decision may create havoc in the sector in the short term in the form of job losses and fewer startups willing to operate, industry experts believe.
At the 50th meeting which concluded in Delhi on Tuesday, the Goods and Services Tax (GST) Council made a decision to impose a flat 28% GST on the full value of online gaming, horse racing, and casinos.
"GST Council has decided that online gaming, casinos, and horse racing will be taxed at 28% at the entry point on the full face value of bets," Finance Minister Nirmala Sitharaman said in a media interaction, according to PTI.
With this, the GST is set to be collected on gross revenue or total prize pool, without any distinction between games of skill and games of chance.
“The discussion also looked at what is skill-based and what is chance-based. Whatever the decision on each of the games is either skill or chance-based, or being both or being neither, is not what we are looking at. We are purely looking at that which is being taxed (sic),” the finance minister said.
Gaming industry says nay
The move to impose the GST at the maximum tax slab—up from 18% taxed on gross revenue for some companies earlier—has not gone down well with the online gaming industry.
"Today's decision at the GST Council is not in the national interest as it will destroy a significant portion of the successful companies in India's startup ecosystem. Unfortunately, it also appears to show that the different limbs of the government are not in sync," Amrit Kiran Singh, Chief Strategy Advisor at Gameskraft, an online skill-based gaming and entertainment company, and the owner of Gamezy and RummyCulture, said in a statement.
"This is a self-goal that causes a body blow to India's startup ecosystem," he lambasted.
The decision may create havoc in the sector in the short term in the form of job losses and fewer startups willing to operate.
"It is likely to create a lot of financial constraints for startups... It also hinders our ability to expand our reach to new markets and reach a wider audience," Aaditya Shah, COO of IndiaPlays, told YourStory. IndiaPlays is an online gaming firm that offers games including poker, rummy, and fantasy sports.
"More directly, it will affect our ability to acquire new customers... a key metric that is required for any gaming company to grow," he noted.
Players and onlookers in the space warn that the transition to a higher tax slab in online gaming is likely to result in gamers migrating to platforms outside India in a bid to avoid paying taxes altogether.
"With this move, illegal platforms are the ones most likely going to stand to benefit," Roland Landers, CEO of All India Gaming Federation told YourStory. "These are companies, which are based offshore, are not obligated to pay taxes to the Indian government or comply with rules like the new IT rules, and that's only going to be detrimental to Indian consumers."
An ideal situation would have been to continue with the previous tax slab or revise the 28% GST slab on gross revenue, industry insiders told YourStory.
"Overall this seems to be a sad day for us in gaming," said Shah.
Edited by Kanishk Singh