28% GST imposed on online gaming: How this will impact ‘luxury gamers’
Finance Minister Nirmala Sitharaman confirmed the levy, stating that the tax would be applicable at full value for online gaming, horse racing, and casinos.
New Delhi: During the 50th GST Council meeting held in New Delhi on July 11th, an announcement was made regarding the taxation of online gaming, horse racing, and casinos. Union Finance Minister Nirmala Sitharaman confirmed that these activities would be subjected to a 28% tax at full value.
The decision has caused an uproar in the online gaming industry, with many expressing dissatisfaction with the new tax.
The Impact of 28% GST on Gaming
Shivani Jha, Tech Policy Lawyer and Director of the E-Gamers and Players Welfare Association (EPWA) explained that under the new GST rates, players would be charged ₹28 for every ₹100 spent on an online game.
Jha expressed concern that this tax burden will discourage players from participating and impose financial hardships on gaming professionals, potentially driving them towards offshore platforms. She highlighted the potential negative consequences for India’s vision of a progressive digital gaming ecosystem, as reported by Live Mint.
The effective date for implementing the 28% GST levy on online gaming will be determined after amendments to the GST law.
Online Gaming Industry Voices Dismay
The online gaming industry has reacted strongly to the GST Council’s decision, calling it “catastrophic.”
Roland Landers, CEO of the All India Gaming Federation (AIGF), characterized the decision as “unconstitutional, irrational, and egregious.” Landers expressed concern that the move could wipe out the entire Indian gaming industry, leading to significant job losses while benefiting illegal offshore platforms. The AIGF represents prominent players in the industry, including Mobile Premier League, Gameskraft, Paytm First Games, Zupee, Nazara, and Rush.
Bhavin Pandya, Co-founder and Co-CEO of Games24x7, expressed distress over the decision, stating that it would render the industry unviable. Pandya criticized the decision to impose the GST on Contest Entry Amount (CEA) instead of Gross Gaming Revenue, the international standard for the sector.
Siddharth Sharma, SVP of Business Strategy and Head of Digital Works (A23), echoed similar sentiments, stating that the new tax rate of 28% on Gross Gaming Value would have far-reaching consequences and question the industry’s viability. Sharma expressed concerns that the move would hinder industry growth and push users towards illegitimate betting and gambling operators.
Finance Minister’s Response to Gaming Industry Concerns
During the post-GST council meeting, Finance Minister Nirmala Sitharaman was questioned about the government’s stance on e-gaming, particularly regarding its impact on children.
Sitharaman clarified that the council does not aim to extinguish any industry but is cautious about sending the wrong message by reducing tax rates for such industries to the level of essential goods.
The decision to impose a 28% GST on online gaming has stirred a debate about the potential repercussions on the industry, tax revenues, and the growth of a regulated domestic gaming sector.