28% GST on online gaming, horse racing, casinos on full face value. Explained - Hindustan Times
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28% GST on online gaming, horse racing, casinos on full face value. Explained

Jul 11, 2023 09:07 PM IST

The Goods and Services Tax Council decided to levy 28% GST on online gaming, horse racing and casinos on full value in its 50th meet in New Delhi on Tuesday.

The Goods and Services Tax Council decided to levy 28% GST on online gaming, horse racing and casinos at full value, Union Finance Minister Nirmala Sitharaman said after the conclusion of the council's 50th meet in New Delhi on Tuesday.

Nirmala Sitharaman addressing the Press Conference after 50th GST Council meeting held today at New Delhi(Twitter/cbic_india)
Nirmala Sitharaman addressing the Press Conference after 50th GST Council meeting held today at New Delhi(Twitter/cbic_india)

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There were deliberations on whether to impose a 28% GST on the face value of bets, gross gaming revenue, or just on platform fees and the council settled on taxing the turnover.

How 28% GST will impact gaming

After the new GST rates implementation 28 will be charged per 100 spent on an online game, explained Shivani Jha, Tech Policy Lawyer and Director, EPWA (E-Gamers and Players Welfare Association). “This will not only discourage players from playing, the professionals for whom its a livelihood will be burdened by taxation. It may also force them to play on offshore platforms, and the whole vision of creating a digital progressing gaming ecosystem seems blurry at this point,” she told Live Mint.

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Government wants to end online gaming?

“The implementation of a 28% tax rate will bring significant challenges to the gaming industry," Aaditya Shah, chief operating officer, IndiaPlays told Hindustan Times.

“This higher tax burden will impact companies' cash flows, limiting their ability to invest in innovation, research, and business expansion,” he added.

In the post-GST council meeting media briefing, Sitharaman was asked if governments want to demotivate e-gaming given its adverse impact on children. The finance minister said that the council do not want to end any industry but they also don't want to give the wrong message in the country by lowering the tax rate on such industries to the level of essential goods.

“The decision to levy 28% on gross value in the case of online gaming and casinos is perhaps not what the industry was hoping for. While it has been indicated that this proposal is 'clarificatory' in nature, it would have been better to make it prospective to put the past dispute to rest," Pratik Jain Partner Price Waterhouse & Co LLP told HT.

No differentiation in games of skill or chance

Tax on e-gaming would be imposed without making any differentiation based on if the games require skill or based on chance.

The finance minister said that a discussion was held on if an online game is skill-based or chance based. “We are not looking at a game if it is skill-based, chance-based or both, we are purely looking at the value it generates that can be taxed,” the FM said.

"Very substantive discussions took place on online gaming. MeitY is likely to provide a list of an inclusion or exclusion list of games. Our position is clearly on taxation. We will still align it with MeitY’s rules," Sitharaman added.

'Gamblers and e-gamers should not be treated same': Industry

"There is a fine line between skill-based games and casinos/betting apps, and they must not be treated the same way," IndiaPlays' Shah said.

“Introducing a 28% tax rate not only hampers online gaming platforms' capacity to develop new games and technologies but also undermines their competitiveness in the market. Moreover, the constrained financial resources hinder their ability to enter new markets and reach a wider customer base,” he added.

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