Online gaming firms and industry groups urge government to reconsider 28% GST

A group of 127 online gaming players, including industry federations, have urged the government to reconsider the GST Council’s recommendation to impose 28% tax on the full amount of money placed on online gaming platforms, saying the decision can have “devastating implications, including shutdown of businesses, for MSMEs and startups”. 

A letter addressed to the finance minister and the prime minister said, “The recent recommendation by the GST Council to club online skill gaming, a constitutionally protected activity, with betting and gambling, has left the industry in significant distress.”

“The proposal to charge GST on the full deposit value will reverse the growth trajectory of the industry,” it added. 

The representatives argued that the decision will encourage illegal offshore gambling operators, drive Indian users to them, and ultimately lead to neither optimal tax collection nor the growth of the legitimate industry.

Nazara Technologies, Third Unicorn (Crickpe), WinZO, Baazi Games, Dangal Games, Deltatech Gaming (Adda52), Gamepe Technologies (Tamasha Games), Gameskraft Technologies, MyTeam11 Fantasy Sports (MyTeam11) and industry groups such as All India Gaming Federation, E-Gaming Federation, Federation of Indian Fantasy Sports, and All India Game Developer’s Forum were among the 127 names in the letter.

On Tuesday, the Ministry of Finance announced its decision to levy 28% GST on online gaming, horse trading, and casinos, drawing sharp reaction from industry players. Talking specifically about online gaming, the authorities said the tax will be imposed at full value, regardless of whether the games are based on skill or chance.

In their letter, the companies put forth eight core points to justify their argument, including impact on customer affordability, job loss, and overall stifling of foreign investment and global competitiveness. 

They pointed out that the industry employs around 1 lakh people, across engineering, marketing, design, and research jobs, besides supporting lakhs of content creators and game streamers who belong to Tier II-V cities.

“The growth projections of the industry envisage more than 5 lakh new jobs over the next 5 years. Any negative impact on the industry will lead to companies making cuts in their spending, a majority of which goes towards employing the Indian youth, thereby resulting in significant job losses,” read the letter undersigned by 'Proud Entrepreneurs of Bharat'. 

Moreover, it was stated that the the proposed move will lead to increase in the cost of the game for the users, who are already required to pay 30% income tax on winnings. Unable to bear the cost, the users could shift towards black market operators. 

The companies have requested the ministry to discuss this issue in detail with offices at the earliest and submit any additional information in this regard.

Demand for tax on revenue 

The industry currently pays 18% GST on the gross gaming revenue/platform fee. As per the firms, the increase to 28% will result in a 55% increase in GST quantum. 

However, for the sector to survive, the players have called for levy on the platform fee/gross gaming revenue that is earned by the industry together.  

“This is similar to any other technology service platform, where only the revenue that platforms earn are considered for the purpose of levy of GST. The industry stands in unison to request a viable and progressive GST regime and appeals for reconsideration of the current recommendation,” they said.

A long term net revenue loss for the exchequer was also one of the downturns of the proposed tax, the industry players noted.

“We sincerely hope that the above request is considered positively in the interest of protecting India’s nascent and high growth potential online skill gaming industry,” the letter concluded.