GST Council Defers 10 Hike On Online Gaming

GST Council Defers 10 Hike On Online Gaming

The GST rate on casinos, race courses, and online gaming have been subject to much discussion amidst widespread pushback from the online gaming industry, in particular, on the government's recommendation of a blanket hike of Goods and Services Tax (GST) rates on casinos, racecourses, and online gaming from 18 percent to 28 percent.

Karnataka Chief Minister BS Bommai, a member of the Advisory Group of Ministers (GoM) on the issue has, however, announced that this decision has been deferred.

”The decision on online gaming has been deferred. There were issues that need to be discussed.", said  Karnataka Chief Minister, BS Bommai. "The GoM on online gaming has been given another 15 days,” he added.

Earlier, the three major gaming industry associations of India, E-Gaming Federation (EGF), All India Gaming Federation (AIGF), and Federation of Indian Fantasy Sports (FIFS) had all raised their concern over the proposed levy of tax on Full Contest Pool rather than on Gross Gaming Revenue (GGR), while suggesting that this could herald the demise of the online skill gaming industry in India.

Industry players have suggested that the blanket hike would also essentially undo all the progress the industry has made in the classifying games-of-skill, vs. games-of-chance

"Currently, the GST rate on online gaming falls within 2 slabs – 18% and 28%. Online games that involve financial betting, or gambling attract 28 percent GST while other online games, are taxed at 18 percent. Online gaming platforms which typically earn commission are also liable to pay GST at the rate of 18 percent on their commission.", says Mr. Siddharth Surana, Director, RSM India

A rise in tax rates on full contest prices could also mean that gaming companies are forced to charge more for their uses, leading to an inflated ecosystem

"A higher GST rate of 28% as against 18% would have an impact on the profitability and pricing of the online gamers, and many players may need to pass on these rate hikes to their loyal community of online gamers. It would be interesting to also understand the GoM’s recommendations on certain types of online gaming such as online learning games, trivia quizzes etc. which assist in education and distance learning.”

"The GST Council's decision to ask the GoM to reconsider its report on online gaming, casino and race courses is a welcome decision. The narrow point that the GoM should reconsider is the method of valuation of online gaming services. In line with global practices, GST should be on the platform fee or commission retained by online gaming platforms and not the contest entry fee," said technology & gaming lawyer, Jay Satya.

“Such a step is not only in dissonance with international best practices but is also violative of the principles of GST. 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. The platform charges a predetermined fee, known as GGR, and pays tax on that. If you were to charge an increased tax rate on the entire quantum (pooled money plus commission), it is not only principally incorrect but will also annihilate this sunrise sector,” said Sameer Barde, CEO of EGF.

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