The GST Council has decided to defer its decision on imposing a 28 percent Goods and Services Tax (GST) on online gaming by nearly two more weeks. During its meeting in Chandigarh, the council gave a ministerial panel a period of 15 days to finalise regulations needed for a proposed new tax regime for online gaming, casinos, and horse racing, Karnataka Chief Minister Basavaraj S Bommai reportedly said. At present, online gaming is clubbed together with casino and horse racing in the country, and hence faces a GST of 18 percent. This is imposed on the service fee a company charges for its online gaming services, and not on the winning amount.
As reported by the Financial Express, Bommai said, “The decision on online gaming has been deferred. There were issues which needs to be discussed. The GoM on online gaming has been given another 15 days.” For those unaware, the GoM is a body of eight ministers, led by Meghalaya Chief Minister Conrad Sangma. GoM decisions are generally not challenged by the GST Council, which is headed by Finance Minister Nirmala Sitharaman.
On May 18, Sangma took to Twitter to confirm that the GoM reached a consensus on casinos, race courses, and online gaming. While he didn’t reveal much else about the tax structure, Sangma said the report of GoM’s submissions will be handed over to Sitharman at the next GST Council meeting, which is taking place now.
Prior to the meeting, the E-Gaming Federation (EGF), the All India Gaming Federation (AIGF), and the Federation of Indian Fantasy Sports (FIFS) expressed deep concern about the increase of online gaming GST from 18 percent to 28 percent. The associations said that what is more worrying is some reports suggesting that the tax may be levied on the total pool (prize money pooled plus the platform commission), and not on gross gaming revenue (GGR), as reported by IANS.
The latter, if implemented, they said, will mean the demise of the online skill gaming industry in India.
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"Such a step is not only in dissonance with international best practices but is also violative of the principles of GST," said EGF CEO Sameer Barde.
In the last few years, the online skill gaming sector has emerged as a growth engine for the Indian economy with direct benefits to a lot of sectors such as fintech, sports, animation and graphics, semiconductor, edtech, and software development.
In the last six years, the online skill gaming sector has received foreign investment of over $2 billion and employs around 50,000 people.
Essentially, the online skill gaming operators are platforms, which bring players from various geographies together. The money pooled is eventually distributed to the winning player.