28% GST on full face value will break the back of online gaming industry: Bihar IT Minister

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After Delhi Finance Minister Atishi Marlena Singh, Information Technology Minister of Bihar, Israil Mansuri, has also expressed his concerns today over 28% GST rate on full face value on online gaming.

In his Tweet, Mansuri claimed that the decision by the GST Council will “break the back of this growing industry”. The increased contest entry fee will be greater than the profit margins thanks to the new taxation policy, and so both the gaming and IT sector will become unviable, he warned.

He further said that the Union Finance Minister Nirmala Sitharaman needs to know that the tax, with the new GST rate, will be more than the revenue earned by the online gaming companies, making them unable to sustain their business.

The GST Council will be meeting again today to deliberate on the topic and while the revenue secretary Sanjay Malhotra has clarified that the tax will be levied on the full face value, Mansuri believes that the Council should reconsider their July 11 decision altogether during the meeting today.

He further added that the FM needs to understand the business models of the online gaming firms before taking any decision as the industry attracts a substantial chunk of Foreign Direct Investments (FDIs).

So far, online gaming companies have made several requests for reconsideration, specifically about how the tax will be levied and sought clarity on the same. They believe it should be levied on gross gaming revenue (GGR) as it is the international standard and can help in the growth of the sector.

However, tax on full face value will lead to increased tax burden and cost of games, driving users to illegal offshore betting platforms. As a result, several online gaming firms would potentially close down, leading to job losses, too.