28% GST On Online Gaming: What You Need To Know

On July 11, the Goods and Service Taxes (GST) council decided to impose a 28% on online gaming, horse racing and casinos. The government is planning to facilitate this by bringing in a legal amendment in this monsoon session. It is decided that a uniform 28 per cent tax will be levied on full face value for online gaming, casinos and horse-racing.

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A group of ministers was composed to look into the matter of issues surrounding the taxation of online gaming, horse racing and casinos. The group submitted its first report in June 2022 which was the taken up in the GST council in June last year.

Following this report, there were lot of debates and discussions regarding the implications of such taxes. All the discussions centered around two questions: whether the activities of race course and online gaming amount to betting and gambling or not and how should the supplies of casinos, race courses and online gaming be valued.

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What could be the implications of such taxes on the industry?

The implications of the 28% GST on online gaming in India are far-reaching and will likely have a significant impact on the industry. Here are some of the key implications:

- Increased costs for gaming companies: The tax will increase the costs of doing business for gaming companies, which could lead to higher prices for consumers.

- Reduced competition: The high tax could make it difficult for smaller gaming companies to compete with larger, more established rivals.

- Less innovation: The tax could discourage innovation in the online gaming industry, as companies may be less likely to invest in new products and services.

- Increased regulation: The government may use the tax as a way to increase regulation of the online gaming industry. This could lead to stricter rules and requirements for gaming companies.

- Shift to offshore gaming platforms: The high tax could lead some consumers to shift to offshore gaming platforms, which are not subject to the GST. This could hurt the Indian gaming industry and lead to job losses.

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What does the online industry have to say about this?

While the government has maintained that this decision is not intended to end any industry. In the official statement Nirmala Sitaraman said ¡°Our agenda is not to end any industry¡­ all types of businesses have to function¡­ there was discussion on the moral question that on one front, you do not want to end an industry. But that does not mean that you give more incentives to them than essential goods¡­ all states participated in this decision which has been pending for the last 2-3 years. We could take the decision because every state clearly participated in it,¡±

However, the gaming industry calls the decision ¡®unconstitutional¡¯ and feels that this might be the reason for its downfall. The decision is ¡°extremely unfortunate¡± and will surely lead to ¡°a nearly 1000% increase in taxation and prove catastrophic for the industry¡± said Malay Kumar Shukla, Secretary of E-Gaming Federation which represents Games 24¡Á7 and Junglee Games.

Overall, the 28% GST on online gaming is a significant change that will have a major impact on the industry. It is still too early to say what the long-term impact of the tax will be, but it is clear that it will have a significant impact on the way that online gaming is regulated and operated in India.