---

28% GST On Online Gaming: What It Means For The Players?

The Goods and Service Tax (GST) Council sent waves of shock and unrest among the online gaming community after its 51st GST Council Meeting held on 2nd August 2023. The council upheld its previous decision to impose 28% GST on the face value of deposits made by a player.

Previously, the GST Council, in its 50th GST Council Meeting dated 11th July 2023 had announced the change in taxation policy on online gaming. While companies were already paying 18% GST on the gross gaming revenue (GGR), the 50th council meeting decided to impose a tax of 28% on the face value.

The decision faced a lot of backlash from the companies involved, the players and industry stakeholders, including investors. Following the opposition, the council decided to meet again on 2nd August 2023 to look into the matter once again and make amendments if required. 

Likewise, the council held a virtual meeting with ministers from several states. After a nearly three-hour-long discussion, the Finance Minister, Nirmala Sitharaman, addressed a press conference wherein she upheld the previous decision of the council. While the impact that the decision will have on the industry is devastating, the online gaming industry of India looks to be in bad shape going forward.

To understand what the 28% GST on face value in online gaming implies, click here. 

GST Council: 28% GST To Be Levied On Face Value Of Deposits

Implications Of 28% GST On Online Gamers

One thing to note here is that the 28% GST is taxable directly to the companies. The players are not liable to directly pay this 28% on their deposits to the government. However, the tax burden will incidentally fall onto the players creating indirect implications for the players.

That means, although the impact of this GST will not reflect directly on their online gaming transactions, it will burn a hole in their pockets indirectly. Here are some ways how:

Higher platform fee

Currently, online gaming platforms and operators charge a nominal platform fee. For example, if the entry fee to play a game is ₹100, say ₹10 is usually the platform fee, while the remaining ₹90 goes into the game’s prize pool. This ₹10 is known as the GGR and is one of the primary sources of revenue for the operators. Earlier, the platforms paid 18% on this ₹10, which was ₹1.8. However, now the platforms would have to pay 28%, in this case, ₹28, irrespective of how much the platform fee is.

Naturally, this huge tax burden will now be partially transferred onto the players by the platforms by charging a higher platform fee to recover a portion of the tax. Thus it will not be surprising to see the platform fees spike upwards. The player does not benefit from the platform fee in any way since they do not win from it; it is just an additional expense to the player.

Reduction In Offers And Promotions

Players may not be able to enjoy lucrative offers, discounts and promotions anymore. The companies will now be forced to pay more tax than the revenue they earn. Subsequently, the companies will now look at cutting costs in every possible way to survive the tax wrath.

This cost-cutting includes giving lesser and tighter offers to the players. That does not mean there will be no offers at all. Companies will still try to attract players but with the lost cost possible. The offers going forward will not be as attractive and lucrative as before. For example, several brands have offered as much as 100% cash back on the platform fee in the past. That will no longer be the case, as brands will not be able to afford such high rates of cashback anymore.

Decreased Net Winnings

The government is already charging tax deducted at source (TDS) of 30% on online game winnings. Besides, as mentioned earlier, the 28% GST will indirectly burden the players. This indirect tax amount will add to the existing 30% TDS on winnings that the players are already paying. This means the net winnings of the players will now drop further. 

Reduced Prize Pools

If the platform fee increases, it’s quite natural that there will be a relatively smaller amount that goes into the prize pool. Secondly, with the increased tax burdens and net winnings, the number of players may also see a downward trend. This will thus lead to smaller player fields and smaller prize pools.

For more news and updates, keep reading Gutshot Magazine or follow us on our social media handles. We are present on Facebook, Instagram, Twitter, and Telegram.

---

---

More News

---

Comments