28% tax slab is impediment to nascent online gaming industry
Because of a few outstanding issues, the GST Council has postponed its decision on imposing a 28 per cent GST on the online gaming industry by 15 days
Parul June 30, 2022
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On one hand, FM Sitharaman calls online gaming gambling. While the 47th GST Council is still deciding on the new tax slabs on the online gaming industry. Currently, the GST Council has decided to defer its decision on imposing a 28 per cent Goods and Services Tax (GST) on online gaming, casinos, and lottery by nearly two more weeks.
The GoM will submit the report on the issue after 15 days. The decision has been deferred because there are issues that need to be discussed.
Roland Lander, CEO of the All India Gaming Federation said, “At one level the sector is very upbeat at the prospect of contributing towards growth of the Indian economy. We are very enthused and grateful for the encouragement shown by the government, through formation of AVGC task force, constitution of inter-ministerial task force and the recent initiatives by MeITY to engage with the industry. But all this will amount to nothing, if it is not supported by a progressive taxation regime. An increased tax rate, and then levying the tax on the entire contest entry amount (instead of GGR), will be catastrophic for the industry, even nipping its potential in the bud,”
The online gaming industry in India is a sunshine sector and is currently estimated at 930 million USD with an annual CAGR of 22 percent making the industry the second-largest online gaming market. As per the EY-FICCI report, online gaming will continue to grow and reach 500 million gamers by 2025 to become the fourth largest segment of the Indian M&E sector.
Commenting on the ongoing discussion, Ankur Singh, CEO and Founder, Witzeal Technologies, said, “The online gaming sector is at a nascent stage and has a promising potential to evolve further and contribute hugely to the overall economy of our nation. FM Nirmala Sitharaman in her budget speech also recognized this potential and cited that the AVGC sector will provide numerous employment opportunities especially for young people and announced the Center’s decision to establish an AVGC promotion task force,”
According to him, with such progressive steps being taken, the recent discussions on the GST proposal on the gaming industry feels like a step-back and drastic.
Today, the online gaming industry encompasses above thousand start-ups with a promising outlook and hence it becomes crucial to have the tax slab at a reasonable rate that boosts the confidence of entrepreneurs and aspiring leaders of this ecosystem.
The industry also has been gaining traction in the country and has been cumulatively contributing to the economy of our nation, attracting Foreign Direct Investment (FDI) and generating direct and indirect employment opportunities.
“We believe that a consultative approach with industry stakeholders would create a consensus-driven proposal that would enable the government to view it from the standpoint of reforming and boosting the gaming industry. The government’s decisions and support will determine the growth trajectory of the stakeholders and the nation as a whole. Having said that, we hope for a fair GST rate and government’s support in order to foster the long-term growth and sustainability of the industry and its ability to compete globally.” Singh further added.
The GoM had suggested that in the case of online gaming, the activities should be taxed at a rate of 28 per cent on the total value of the consideration, which includes the entry fee for a contest that the player has paid to participate in such games. Additionally, it suggested that the 28 per cent GST rate be applied to all games of skill and chance without exception.