Revenue department recommends 28% GST on gross entry amount: IANS Report

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Ahead of a critical meeting of the Group of Ministers (GoM), formed to discuss GST on online gaming, casinos, and horseracing takes place on May 18, a controversial proposal by a unit of the Finance Ministry, could spell the death knell for most gaming companies in India.

The GoM is headed by Meghalaya Chief Minister Conrad Sangma. The GoM meet in the first week of May and was unanimous on 28% GST. 

According to a report on IANS, the Tax Research Unit (TRU) of the Department of Revenue of the Finance Ministry has recommended charging 28 per cent of the gross Contest Entry amount. Currently, 18 per cent GST is charged only on the platform fee by gaming companies for skill games.

Real Money Gaming in India, which usually peaks during the IPL aided by fantasy sports, is dominated by few operators, with Dream11, MPL and Games24x7 controlling over 95 per cent of the market. All three are unicorns as per their latest valuation. There are over 950 platforms in India that offer esports, casual games and card games. The gaming industry, directly and indirectly, employs lakhs of people in the sector.

An industry source told IANS, “Currently, the platform margins range between 5-10 per cent for all formats, except fantasy sports. Esports like chess, carrom, car racing, first-person shooter, etc. charge around Rs 8 for 100 rupees deposited by the user. This becomes the revenue for the gaming companies and the remaining 92 rupees is paid back to the winner of the contest. Similarly, for skill-based cards games, platforms charge Rs 5-10 for every 100 rupees given by the user.”

The source added, “Only in fantasy sports, the platforms charge around Rs 15 for every 100 rupees provided by the user. Therefore, if the TRU’s recommendations are accepted, the GST liability on the gaming companies will be 2-3X of the revenue of gaming platforms, except for fantasy platforms.”

All the smaller companies, along with their investment and employment, could potentially be wiped out if the proposal by TRU is implemented.