While everyone is focused on the yet-to-be finalized goods and service tax (GST) rate on online gaming, the GST council’s Group of Ministers (GoM) is probably going to impose a 28% tax on gross gaming revenue (GGR), according to reports.

Although the final recommendations are still awaited, the 28% GST only on GGR rather than imposing a blanket 28% GST on online gaming will be a big boost for the industry, said All India Gaming Federation CEO Roland Landers.

Prior, the GoM had suggested that, on account of online gaming, the activities ought to be charged at 28% of the full worth of the consideration, including the contest entry fee paid by the player for participation in such games. As of now, the GST rate for online gaming is at 18%, though it is at 0% on the contest entry fee.

The proposal to impose a sweeping 28% GST on online gaming frightened the industry. As industry stakeholders worried about the high GST rate on the total face value of an online game that can make businesses viable, they also warned that it would lead to an increase in the gray markets.

However, the GoM has been responsive to the stakeholder concerns and has adopted an open, transparent, and consultative approach, Roland Landers added.

“Our (AIGF) only request has been to charge GST on the gross gaming revenue, which is the practice that has always been followed and is also globally accepted,” he said.

For the uninitiated, gross gaming revenue is the revenue generated by platforms after the prize pool is deducted.
According to Landers, GST on the whole of the contest entry amount or face value might push the nascent skill gaming industry into despair. Hence, most companies will not be able to recover and will shut down.

The GoM, driven by Meghalaya CM Conrad Sangama, is supposed to submit its last report one month from now. The decision to impose a 28% GST on casinos, online gaming, and lottery tickets was conceded at the GST Council’s 47th meeting in June, as the issue needed more discussion.

Recently, the Internet and Mobile Association of India (IAMAI) appealed to the public authorities and the GST Council to keep up with the status quo in the online games of skill industry.

It should be noted that the GoM additionally suggested that no distinction ought to be made between games of skill and chance for imposing a 28% GST. IAMAI said it would be against the letter and spirit of the Supreme Court’s judgment to equate games of skill with games of chance—gambling, betting, or wagering.

According to a FICCI-EY report, the country’s online gaming segment is expected to reach INR 101 billion by 2021, with a 28% growth rate. More specifically, the number of online gamers increased from 360 million in 2020 to 390 million in 2021.

Credit: Inc42