Highest GST on Online Games Will Wipe Out Entire Industry: RIP Gaming Industry, Caution Experts?

The GST council may have signed the death warrant of online gaming companies operating in India. The council has agreed to impose the highest Goods and Services Tax (GST) on online gaming, casinos, and horse racing.

The GST council’s decision to impose 28 percent GST could destroy revenues and dash the hopes of players hoping for handsome winnings, claimed the All India Gaming Federation (AIGF).

New GST Rates Clumps Game Of Skill With Gambling

The GST Council which periodically convenes to decide on the taxes to be levied, reduced, or increased on goods and services in India, has decided to levy the top-most slab of tax on all online gaming platforms, and the money that is put by the players as well as the winnings.

Specifically speaking, the GST Council has decided to impose a 28 percent tax on online gaming, casinos, and horse racing. The tax would be levied on the full-face value.

RIP – Real money gaming industry in India. If the govt is thinking people will put in ₹100 to play on ₹72 pot entry (28% Gross GST); and if they win ₹54 (after platform fees)- they will pay 30% TDS on that – for which they will get free swimming pool in their living room come…

— Ashneer Grover (@Ashneer_Grover) July 11, 2023

As highlighted by the Tweet above, players will not get the full amount credited to their games as the government will take away 28 percent. Moreover, even if the players win, they will get a petty amount after the platforms deduct their fees.

It has to be further noted that the GST council is not categorizing online gaming as “Game of Skill”, and “Game of Chance” or gambling. Speaking about the development, AIGF CEO Roland Landers said:

“The decision ignores over 60 years of settled legal jurisprudence and lumps online skill gaming with gambling activities. This decision will wipe out the entire Indian gaming industry and lead to lakhs of job losses and the only people benefitting from this will be anti-national illegal offshore platforms.”

AIGF represents companies such as Nazara, GamesKraft, Zupee, and Winzo. It has deemed the decision by the council unconstitutional, irrational, and egregious.

It is interesting to note that the majority of the states have opined that the GST council must not levy more than 18 percent GST. However, the GST council has levied 28 percent on all games, irrespective of their nature, lamented IndiaPlays COO Aaditya Shah:

“Skill-based games and apps engaged in betting or casinos should not be treated in the same manner.”

Blanket Proposal To Levy GST On Full Face Value On Online Gaming Is Unfair?

Deloitte India, Partner, Shilpy Chaturvedi has categorially noted that the GST Council has proposed to increase the tax rate to 28 percent rate and that too on the entry amount, particularly for real money games. She added that the “GST Council has recommended removing the critical distinction between a game of skill and game of chance, which has always been a determining factor in applying the rate of tax and valuation.”

What is even more concerning is that the GST will be levied on the entire amount put up by the gamers. Most industry experts had hoped that the GST Council would collect taxes on a margin and not at full face value.

It is possible that multiple agencies, organizations, and federations representing online gaming companies will appeal the decision. At the very least, these associations may urge the GST Council to reintroduce the distinction between “Games of Skill” and “Betting/Gambling” games.