The 50th Goods and Services Tax (GST) Council meeting resolved to collect 28% GST on full face value on online gaming. But the gaming world, which has been talking about such a decision for a while as it seemed imminent, is seeing it as a drawback.
Finance minister Nirmala Sitharaman during a press conference stated that online gaming, horse racing, and casinos, all will be taxed at 28%. There will be some amendments to the GST law to include online gaming, she added.
However, Roland Landers, CEO of The All India Gaming Federation, stated that the decision by the GST Council was “unconstitutional, irrational, as well as egregious” and it ignored over 60 years of settled legal jurisprudence and lumped online skill gaming with gambling activities.
He also said that this decision would wipe out the entire Indian gaming industry and lead to lakhs of job losses. The only people benefitting from this will be anti-national illegal offshore platforms, he added.
“It is very unfortunate that when the central government has been supporting the industry, in terms of online gaming rules, clarity on TDS, etc, such a legally untenable decision has been taken, ignoring the views of most GoM states who studied this matter in detail. We hope that the government will reconsider this recommendation and not implement it, as it will be catastrophic for the 1 trillion dollar economy dream of the Prime Minister,” said Landers.
Director-General of Federation of Indian Fantasy Sports Joy Bhattacharjya has also called it a “disappointing” decision. “A change in valuation to tax on the total consideration will cause irreversible damage to the industry, loss of revenue to the exchequer, and loss of employment for lakhs of skilled engineers. Needless to add, this decision will have a chilling effect on the USD 2.5 billion of FDI already invested by investors and jeopardise potentially any further FDI in the sector. Further, this decision will shift users to illegal betting platforms, leading to user risk and loss of revenue for the government. We humbly request the GST Council and the Government of India to reconsider this decision,” he said.
Amrit Kiran Singh, Chief Strategy Advisor to the Founders of Gameskraft, said the decision negates all the good work that the central government has done to support the Skilled Online Gaming ( SOG) industry: appointing MeitY as the nodal ministry for this industry, notifying rules that now govern the industry, allowing for the formation of Self Regulating Bodies (SRBs) to regulate the industry, addressing the ambiguity in TDS rules, etc.
“The decision is not in the national interest as it will destroy a significant portion of the successful companies in India’s start-up ecosystem. Unfortunately, it also appears to show that the different limbs of the government are not in sync,” he said.
Singh pointed out that over 2 lakh jobs have been created by the industry. India has only 1% of the world market share but this could easily grow to 5% and 10 % rapidly with the country being an IT powerhouse, while the USA and China are the market leaders at 23% and 25%, respectively, he said.
“This is a borderless industry and over-taxation in India will only support the cause of the overseas gaming companies and encourage Indian industry to migrate overseas,” noted Singh.
Malay Kumar Shukla, Secretary of E-Gaming Federation, said a tax burden where taxes exceed revenues will not only make the online gaming industry unviable but also boost black-market operators at the expense of legitimate tax-paying players, further undermining the industry’s image and capacity to survive.
“Online gaming is different from gambling, and the Supreme Court and various High Court decisions have reaffirmed the status of online skill-based games as legitimate business activity protected as a fundamental right under the Indian constitution. While the industry was quite optimistic with the new developments including amendments to the IT rules and implementation of TDS on net winnings, all this will be moot if the industry is not supported by a progressive GST regime,” he added.
Shivani Jha, Tech Policy Lawyer and Director at EPWA, told News18 that with so many regulatory and judicial developments in the sector, it seemed obvious that the GST Council will not tax gamers at par with gamblers.
“This development indicates an increase from 1.8 rupees per 100 rupees spent on a game to 28 rupees per 100. This will not only discourage players from playing but the professionals for whom it’s a livelihood will also be burdened by taxation. It may also force them to play on offshore platforms, and the whole vision of creating a digital progressing gaming ecosystem seems blurry at this point,” she said.
The finance minister said during her press conference that the online gaming industry’s impact and revenue generation have been discussed. “It is not in our agenda to destroy the industry at all,” she added.
She cited the examples of Sikkim and Goa where casinos are a big part of the tourist attraction and said there was a detailed discussion on how to make sure that the taxation won’t affect the tourism of these states or such industries.
“It is not our intention to destroy any of these industries whether it is casinos, horse racing, or online gaming. But all of these have become complicated. It is impossible to pierce the veil which brings opacity on how it is actually operated. So there should be a simplified system,” Sitharaman noted.
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