Whether it be smartphone games or PC/console games, the gaming industry in the Indian market is on the rise and it doesn't seem to slow down. Especially, if we look at online gaming platforms such as RummyCircle, Dream11, and others that advertise lucrative prize money.
However, on June 28, which is tomorrow, the GST Council will decide upon the tax slab that will be applied to online gaming. And this could potentially have negative implications for the avid online gamers, mainly those who play betting, gambling, and lottery games, where they have to deposit a certain sum of money to participate in tournaments. This could also hamper the growth of these gaming platforms.
Govt may impose 28 percent GST on online gaming
The fantasy sports games played on the Internet require users to deposit or invest some money in order to participate and win real cash prizes. Such games include betting, gambling, and lottery games (in some cases). This money invested by each user then forms the total prize pool of the game, and at the same time, the platform takes its commission too from this for providing the service.
As of now, 18 percent GST is levied on this fee, which is called gross gaming revenue (GGR). Now, however, in the forthcoming GST Council's meeting, a 28 percent GST could be amended on the gross gaming value (GGV), which is the total amount deposited by users. And this is worrying the game companies.
"Applying GST on GGV will lead to an almost 900 percent increase in taxes, which will kill the emerging gaming industry," said Amrit Kiran Singh, All India Gaming Federation (AIGF).
Owing to this, game companies could pass on this tax burden to players by reducing the total prize pools, which could then lower the investments players make on such platforms.
Some experts say that this could let many online gamers leave betting platforms like fantasy sports, rummy, and poker. It could further force Indian online gaming companies to move overseas.
Industry insiders believe that the GST plans could slow down the expansion of online gaming companies, and force fantasy sports firms to provide smaller prize pools.
The government’s proposal to tax online gaming at the highest rate under the goods and services tax (GST) has the sector concerned about its prospects for future expansion.
It was reported that a proposal from the group of state finance ministers to collect a 28% GST on casinos, and horse racing, along with online gaming, is expected to be reviewed by the GST Council at its upcoming meeting on June 28.
Online gaming should be taxed at the entire value of the consideration, including the contest entry fee paid by the player upon participation in the game, according to a recommendation made by the Group of Ministers led by Meghalaya chief minister Conrad Sangma.
However, executives and online gaming industry experts have expressed concerns. According to them, it could slow down the expansion of online gaming companies and force fantasy sports companies to provide smaller prize pools, which could cause their loyal customers to quit the platforms in pursuit of greater games. Kowshik Komandur, AVP with one of the leading mobile entertainment companies, OnMobile Global Limited, shared his opinion regarding this matter with News18.
According to him, the online gaming industry revenue is poised for a manifold increase of revenue by the end of this year. While citing details available on Statista, he said that this market is currently at $ 1.54 Billion in 2022 and it’s expected to grow to $ 5 Bn by 2025 leading to 2 lakh additional jobs in the process and India becoming one of the leading gaming markets in the world.
“Today unfortunately in India, every state has different regulations and policies and this has turned out to be a hindrance to the growth of this high potential industry. Constant uncertainty will only lead to the drying up of the flow of FDI into the industry and this is something the government does not want," the industry insider stated.
“The government is now looking to impose 28% GST on the online gaming industry, as a move to regulate the sector, citing the example of horse racing. Any further increase from the current levels would only lead to the burden of the payment of the GST being passed on to the players and could also encourage players to stray towards more viable games hosted offsite," he noted and added that “by all accounts, this move could lead to discouraging the gambling and betting within the country".
Meanwhile, Dinker Vashisht, vice-president, of corporate and regulatory affairs, Games24x7, told Mint that Not only will such a choice (levying GST on total pool instead of GGR) be disastrous for the sector, but it also violates both the principles of fair taxation and GST guidelines.
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