The All India Gaming Federation (AIGF) and expert service firm EY have suggested setting the goods and service tax (GST) rate for the online gaming sector at 18% and looked for clearness on charge relevance on the platform fee. The suggestions, distributed in a joint report, are by current industry practices worldwide. They come when a seven-member board of state minister has been set up to look at the “issues of valuation of services given by online gaming portals, casinos, and racecourses”.

“We have seen that the underlying thought about the tax authorities is that online gaming is equivalent to gambling and betting. What’s more, that is the thing that we are attempting to explain, that there are two kinds of games, there’s a game of skill and a game of chance,” said Utkarsh Sanghvi, partner – Indirect taxation, EY.

“The game of skill is not covered expressly under the current GST system and the tax authorities sometimes don’t comprehend the distinction between what is betting and what is a game of skill. In this way, we needed to clear the confusion.”

In a joint report, “Online Gaming in India – The GST Conundrum’, the two parties have featured that online gaming is the fourth biggest sub-sector under the media and entertainment industry. The report features that any vulnerability and possibility of litigation unfavorably impacts strategies, operations, and entry of new players in the industry.

“Tron out the ambiguities and give a steady tax system when the business is early and simply going to develop from here,” the report said. “The valuation instrument will be unmistakably illustrated to keep away from any ambiguities and potential litigations leading to frivolous tax demands.”

While most industry players have a platform fee, likewise called rake fee, in the range of 4% to 20%, any endeavor to levy GST on the whole stake worth will prompt unviability of the business model and would constrain conclusion of organizations, the report brings up. Rake fee is the commission taken by the online organization for getting sorted out the game.

“The online gaming industry is seeing critical development globally. In India too, it has progressed significantly from its early start in the last part of the 2000s to become over a billion-dollar industry in 2020,” said Roland Landers, CEO, AIGF.

Credits: The Economic Times