Doomsday? 28% GST On Online Games 'Extra Burden' On Users And Platforms, 'Not In Line With Global Standards'

The online gaming industry is regarded as a sunshine sector but it has also ruined families due to the propensity of many to gamble away life's savings.

India's online gaming industry has been equated with casinos and horse racing by Group of Ministers.

If several industry sources are to be believed, the Group of Ministers, constituted by the Centre in September 2021, has approved 28 per cent Goods and Services Tax (GST) on online gaming operators. (More Sports News)

A formal report is expected to be submitted to the Union Finance Minister Nirmala Sitharaman later this week. The gaming industry is bracing for fresh challenges in terms of revenue generation. 

The recommendation to charge 28 per cent on the gross amount (total fee paid by a player) is being seen as a body blow to operators. Currently, real money gaming operators pay only 18 per cent of GGR (Gross Gaming Revenue). GGR means the difference between the amount wagered minus the amount won.

"Given that globally accepted standards of taxation for online gaming is somewhere between 15-18%; a 28% GST on gaming seems like an aggressive move. Moreover, we are yet to assess whether this tax will be levied on the actionable claim (the platform fee) or the winning amounts,” said Shivani Jha, a tech policy lawyer.

If the GoM's recommendation is approved by the GST Council, online gaming operators will have to pay almost 10 times the tax they are currently paying the government. Casinos and race courses are already paying 28 per cent tax levy.

"When GST is levied, the burden of payment gets passed on to the users of such goods or services. In this case, the online gaming community will also have to take an economic burden. This blanket tax bucket puts gambling/horse racing and skill games in the same bucket thereby affecting both the gaming companies and the individuals who play on these platforms," Jha explained.

Shaken for sure, most operators chose to remain guarded. They wanted to 'study' the recommendations made by GoM, which is led by Meghalaya Chief Minister Conrad Sangma.

As reported by Outlook, gaming federations are opposing the 28 per cent GST on the entire face value. If implemented, they see it as 'doomsday.'

The government has come hard at online gaming and cryptocurrency. The high tax slabs are seen as the government's ploy to dissuade the common man from engaging in transactions that can be potentially chancy by nature.

Many gaming companies operate without properly displaying disclaimers. Responsible gaming is preached but not practiced, say critics.  

Even though many online games have won court verdicts as 'skill based", opinion is divided. The biggest worry is addiction and several deaths have been reported across India due to overindulgence.