The GST Council recently decided to levy a 28% tax on the total face value of online gaming transactions. This has caused a lot of worries among industry stakeholders, who are worried about how it could affect the industry’s growth, investments, and jobs.

India’s online gaming industry has seen tremendous growth in the last few years and is expected to be worth $5 billion by 2025. However, the introduction of a 28% GST on the total face value of online gaming transactions has raised concerns among industry players. Such a high tax rate is likely to lead to job losses, impede foreign investment, and encourage players to migrate to illegal offshore platforms.

Stakeholders are also worried about how the new GST rate will affect different types of online gaming, like purchasing in-game apps, PC games, console games, and esports. There’s a lot of confusion about whether the new GST law will have a retrospective or prospective effect.

It is also expected to harm consumers. The higher the tax burden, the more expensive it will be for players to play online games. This will drive them to offshore or illegal platforms that don’t charge GST or have lower rates.

While the government claims that the 28% GST on online gaming is necessary to discourage pay-to-earn, industry experts claim that this is not in line with global best practices where GST is collected on gross gaming revenue (GGR) as well as platform fees.

Several state governments have objected to the decision, claiming that it will harm FDI and the development of the gaming industry. The Minister of State for Electronics and Information Technology has also said that a unified approach is needed to establish a stable and sustainable framework for online gaming.

The 28% GST on online gaming has split the gaming industry and the Government. Stakeholders in the industry claim that the GST on online gaming is not only against the Constitution but also against the growth and survival of the industry. They allege that the high rate of GST on online gaming will encourage users to migrate to illegal offshore gaming platforms, which will in turn lead to revenue loss for the Government. The industry is still appealing for reconsideration, hoping that the Government will reconsider its decision for the sake of this growing industry.

Credit: Game is Hard