AIGF writes to Revenue Secy Sanjay Malhotra requesting reconsideration of 28% GST on online gaming

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After online gaming firms and investors, the All India Gaming Federation (AIGF) has written to the Centre, addressing a letter to Revenue Secretary Sanjay Malhotra regarding reconsideration of the GST Council’s decision to levy 28% tax on full face value amount.

AIGF stated that it has over 120 online skill gaming companies as members, totaling more than 400 million gamers in India across esports, casual gaming and real money gaming. They added that the online skill gaming sector makes up a significant portion and is set to reach $5 billion in value by 2025.

However, the GST Council’s decision will increase the tax burden massively, the gaming body said. Players already have to pay 30% TDS on their winnings, and with the GST rate the cost of playing will rise and the winnings will reduce. This can eventually lead to people shifting to illegal betting platforms, resulting in tax revenue loss for the government.

As a result, having fewer users will ultimately result in huge losses for the businesses leading to job cuts. Equally importantly, the investor sentiment will also be affected, AIGF warned. The gaming body then explained its stance in further detail through scenarios.

It stated that tax on every contest entry amount will result in over 1100-1500% increase in GST burden, leading to the shutdown of the entire industry. On the other hand, tax on initial deposit will increase GST burden by 350-400%. In this scenario, most of the industry, especially gaming startups and MSMEs, will be closed down.

However, GST on gross gaming revenue (GGR) will increase the tax burden by 55-65% only, enabling all gaming firms to remain a key contributor to the economy. Since tax on GGR is in line with global practices, market opportunity will also increase.

Meanwhile, illegal offshore gambling platforms have already started promoting with ‘No GST, no TDS’ messages. AIGF revealed that its member companies have already started losing users to these illegal betting websites.

The gaming body then requested the government to reconsider its decision and continue to levy GST on GGR as it has proven to be much more effective and widely adopted. In case GST on GGR is not possible, they requested the tax be levied on net deposit at 28%.

The letter has come to light just a few days before the upcoming GST Council meet that will be held on August 2 to finalize if the tax is to be applied on the initial deposit or every contest entry amount. The meeting may also decide to include virtual digital asset-based transactions under the GST law.