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Online Gaming To Be Categorized Under Heaviest Tax Slabs? Gaming

Online Gaming To Be Categorized Under Heaviest Tax Slab?

by Smit Trivedi Posted on 27 Jun, 2022

The Goods and Services Tax (GST) Council of India conducted a two-day meeting earlier last week. According to reports, the government plans to levy the highest tax slab on online gaming and fantasy sports. They are likely to consider a proposal of imposing a flat 28% tax on online games like poker, rummy as well as fantasy sports platforms.  This would put online gaming into the highest tax slab which is currently applied on betting and gambling. The council will reportedly meet up again on 28th and 29th June in Chandigarh to determine which slab will be applied.

The change in rule has sent shock waves across the industry with many experts and executives believing that this decision can stop the growth of online gaming brands. They have also voiced a similar opinion for fantasy sports companies sharing how they would be forced to reduce the prize pools on offer, which could see their users leave the platforms.

How will online gaming in India be affected? 

Fantasy sports platforms currently charge a small participation fee to their players when they enter tournaments. The fees alongside other money from the organizers comes together to from the prize pool of the tournament. After the completion of the tournament the online gaming platform usually charges some commission which usually comes from the winners’ earnings as they provided the service on their platform.

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Currently, the gross gaming revenue (GGR) is charged at 18%. However, the government is now rumoured to levy 28% GST on the gross gaming value (GGV). Such news has the firms worried as the fee will come out of the total money which has been paid by users. It would result in gaming companies passing on the burden to the players, by reducing the total prize pools, which could also see the players deposit less money onto the online gaming platforms. 

All India Gaming Federation (AIGF) adviser, Amrit Kiran Singh said, “Applying GST on GGV will lead to an almost 900% increase in taxes, which will kill the emerging gaming industry.” Many stakeholders who are part of the gaming industry have said that a 28% GST on online gaming is an attempt to club gambling along with skill gaming.

Dinker Vashisht, Vice President, Corporate and Regulatory Affairs, Games24x7 said, “Not only will such a decision be catastrophic for the industry, it is also against the principles of fair taxation as well as GST rules. Only the platform fee charged by skill gaming operators constitutes the value of supply.”

The reported changes in the taxation system has brought out a negative wave of emotions among the fast-growing online gaming community so far. It remains to see what the government eventually decides to implement and what impact this decision will have on the online gaming industry.

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