Raising the goods and services tax (GST) on online skill games from the existing 18% to 28% could cause the ‘demise’ of the industry in the country, cautioned three online skill gaming associations.

The two-day meeting of the GST Council concluded today with the Council remanding the matter back to the GoM for fresh consideration on valuation aspects related to taxation on casinos.

In a joint statement, the E-Gaming Federation (EGF), All India Gaming Federation (AIGF) and Federation of Indian Fantasy Sports (FIFS) said what was even more worrying was the apprehension of tax being levied on the total pool (prize money pooled plus the platform commission) and not on the gross gaming revenue (GGR).

The deferment on #gst rate and valuation to the #GoM for #onlinegaming is a very welcome move #onlineskillgamingindustry @aigfmumbai

— roland landers (@rolandlanders) June 29, 2022

The Implementation of these would mean the demise of the online skill gaming industry in the country, the association said. “Such a step is not only in dissonance with international best practices but is also violative of the principles of GST,” the associations observed.

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Highlighting that the sector had the potential to bring in significant economic benefits, the associations appealed to the GST Council to recognise the salience of games of skill and take a decision along with best practices in international taxation.

“Global studies have shown that incidence of taxation, on prize money instead of gaming revenue, lead to reduced tax collections for the exchequer and ends up giving a fillip to black-market operators at the expense of legitimate tax-paying players,” clarified Anwar Shirpurwala, CEO of FIFS.

The AlGF CEO Roland Lander said, “At one level the sector is very upbeat at the prospect of contributing towards growth of the Indian economy. We are very enthused and grateful for the encouragement shown by the government, through formation of AVGC task force, constitution of inter-ministerial task force and the recent initiatives by MeITY to engage with the industry. But all this will amount to nothing, if it is not supported by a progressive taxation regime. An increased tax rate, and then levying the tax on the entire contest entry amount (instead of GGR), will be catastrophic for the industry, even nipping its potential in the bud.”

“Such a step is not only in dissonance with international best practices but is also violative of the principles of GST. Essentially, the online skill gaming operators are platforms, which bring players from various geographies together. The money pooled is eventually distributed to the winning player. The platform charges a predetermined fee, known as GGR, and pays tax on that. If you were to charge an increased tax rate on the entire quantum (pooled money plus commission), it is not only principally incorrect but will also annihilate this sunrise sector,” said EGF CEO Sameer Barde.