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GST hike would be ‘catastrophic’, says online gaming industry, as council defers proposal

All India Gaming Federation, E-Gaming Federation, and Federation of Indian Fantasy Sports, which represent over 90% of online skill gaming market in India, issued joint statement Wednesday.

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New Delhi: Three online gaming industry bodies issued a joint statement Wednesday, expressing “concerns” over a proposed increase in GST (Goods and Services Tax) on the total prize pool.

The proposal to hike GST on online skill games to 28 per cent from 18 per cent was tabled Tuesday at the GST Council meeting in Chandigarh. 

Online gaming must be taxed at the overall value at stake during a game and the entry fee paid by a player, said the proposal by the group of ministers (GoM) on online gaming & casinos, headed by Meghalaya Chief Minister Conrad Sangma. The tax is currently levied on the Gross Gaming Revenue (GGR), the fee collected by an online gaming platform.

A decision on the proposal has been deferred for now. Union Finance Minister Nirmala Sitharaman said at a press conference Wednesday that the GST Council has allowed the GoM to hold another round of consultations with stakeholders “with the condition that the report will be back with the council again in 15 days”.

In their statement, the All India Gaming Federation, the E-Gaming Federation, and the Federation of Indian Fantasy Sports, said the proposed GST regime, if implemented, will be “catastrophic” for the online gaming industry.

Also Read: Battling inflation & high fuel prices, 7 in 10 Indians against hike in GST rates, survey finds

‘Catastrophic for the industry’

Roland Landers, CEO of the All India Gaming Federation, said the online gaming industry is “grateful” to the government for engaging with the industry, including the formation of an inter-ministerial animation, visual effects, gaming and comics (AVGC) task force.

“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,” Landers said.

Industry bodies argue that the proposal is not only a “dissonance with international best practices but also violative of the principles of GST”.

“Essentially, the online skill gaming operators are platforms that 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,” said Sameer Barde, CEO of the E-Gaming Federation.

“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,” Barde added.

Anwar Shirpurwala, the CEO Federation of Indian Fantasy Sports, said “global studies have shown that incidence of taxation, on prize money instead of gaming revenue, lead to reduced tax collections for the exchequer and ends up giving a fillip to the black-market operators at the expense of legitimate tax paying players”. 

He added that any regulations or taxation related to skill gaming should “not be treated at par with games of chance, as these are very divergent activities both in terms of law and in practice”. 

The statement issued by the three industry bodies cited reports on how the industry has supported youngsters by helping them earn and learn.

The three federations collectively represent more than 90 per cent of the online skill gaming market in India. Representatives of these bodies met officials from the Ministry of Electronics and Information Technology (MeitY) earlier this month to discuss the lack of regulations within the online gaming industry.

According to a 2021 EY-AIGF report, foreign direct investment (FDI) in India’s online gaming sector has the potential to cross $2 billion by 2023.

(Edited by Amrtansh Arora)

Also Read: GST Council recommendations not binding, says SC, would ‘disrupt fiscal federalism’ if so treated


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