Navigating the Game of Taxes: The GST Council's Crucial Decision on Online Gaming in India

The GST Council's Decision on Online Gaming: A Turning Point for the Industry?

The online gaming industry in India is currently on tenterhooks as it awaits the final decision of the Goods and Services Tax (GST) Council on the proposed 28% tax on online gaming, casinos, and horse racing. The decision, which was announced during the 50th GST Council meeting, has sparked a wave of concern among industry players, who fear that the new tax regime could stifle the growth of new-age startups and lead to massive job losses.

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A Uniform Tax Rate: The New Reality?

The proposed tax is set to be levied on the "full face value" of bets placed in online gaming, casinos, and horse racing. This means that the tax will be calculated based on the total amount deposited with the online gaming platforms by the player, either in the form of money or virtual digital assets. For casinos, the supply value would be the amount paid by a player for the purchase of tokens, chips, coins, or tickets.

This uniform tax rate, if implemented, would mark a significant departure from the current tax regime, where an 18% GST is levied on the Gross Gaming Revenue (GGR) or platform fee. The GGR is the percentage of the total amount that a player puts in to enter a contest that is deducted as the platform fee. The remaining amount is given back to the player as prize money.

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“In the high-stakes game of online gaming, the GST Council's decision could either be a jackpot or a roll of the dice for the industry's future.”

The Industry's Response: A Call for Revocation

The announcement of the proposed tax has been met with strong resistance from the online gaming industry. Major players in the industry, including companies like Nazara, GamesKraft, Zupee, and Winzo, represented by the All India Gaming Federation (AIGF), have termed the decision as "unconstitutional, irrational, and egregious". They argue that the new tax regime could lead to a 1100-1500% increase in the tax burden, potentially driving players towards illegal and offshore platforms where no tax is payable but will put the gamers into a very high risk.

The industry has also called for a clear distinction to be made between games of chance like gambling and games of skill like gaming. They argue that gaming is a skill-based activity and should not be clubbed together with games of luck like gambling and horse racing.

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The Road Ahead: A Search for Middle Ground

As the GST Council prepares to meet virtually to discuss the amendments needed for the proposed tax, the industry is divided on the possible solutions. Some suggest a 28% GST on a one-time deposit, which would still lead to a 350% increase in GST payout. Others propose introducing "Net Deposit" or "Net Value", which means deducting the total withdrawals from the total deposits.

Regardless of the outcome, one thing is clear: the decision of the GST Council will have far-reaching implications for the online gaming industry in India. As the industry braces for change, all players—big or small—will have to go back to their drawing boards and rethink their strategies. But to what extent, depends on the decision of the GST Council in the upcoming meeting.

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