Finance Minister Nirmala Sitharaman on Tuesday said that the GST Council has decided to impose 28% GST on online gaming, casino business, and horse racing at full face value. There was a discussion on whether to levy 28% GST on the face value of the bets, gross gaming revenue, or just the platform fee. The GST Council settled on taxing turnover.
After the amended GST rates are implemented on the online gaming platforms, Rs. 28 will be charged for every Rs. 100 spent on various online games. This will not only discourage players from playing these games but will also put a huge burden of taxation on the professionals for whom it is their livelihood. Due to this high tax burden, companies will not be able to invest in innovation, research, or business expansion in the online gaming industry due to reduced cash flow.
After the GST Council Meeting, Finance Minister Nirmala Sitharaman was asked whether governments wanted to discourage e-gaming due to its adverse effect on children. The Finance Minister said that the Council didn’t intend to eliminate any industry. However, it doesn’t want to send a wrong impression to the country by reducing the tax rate on such industries to essential commodities.
Finance Minister Nirmala Sitharaman also clarified that the effective date for levying 28% GST on online gaming will come into effect after the GST law amendment. Online gaming companies will be taxed without discrimination regardless of whether games require skill or are based on chance.
Tax will be levied on the full value of the bets placed or on the consideration paid. Earlier, the ministerial panel responsible for online gaming, horse racing and casino games had explored the alternative way of imposing tax on the platform fee of the online gaming platform. This refers to the fees paid to access all the gaming services. However, this option was not supported.
The Federation of Indian Fantasy Sports (FIFS), an autonomous body with members like Dream11, Fantasy Akhada, etc., has expressed disappointment over the decision. It also said that the move could cause “irreparable harm” to the online gaming industry.
The Federation of Indian Fantasy Sports also said that the decision would adversely impact the $2.5 billion FDI already invested by investors. It would also potentially jeopardize any further FDI in the online gaming sector.
Many experts and gaming company owners agree that this will massively affect the online gaming industry. The high tax burden will also put a halt to India’s expanding online gaming industry, and prevent new players from entering the industry. Earlier this year, the Union Government amended its IT Law to crack down on online games offering betting services.