IAMAI urges the government to maintain status quo on skill gaming GST

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The Internet and Mobile Association of India (IAMAI) on Monday urged the Centre and the GST Council to maintain the status quo on GST rates on online games of skill. The Group of Ministers had recommended a GST rate of 28%. Currently, the same is taxed at 18%.

The industry body said that the imposition of a further 28 per cent GST on GGR would increase the incidence of taxation to about 55 per cent, which is patently unfair for an industry which is considered to be a legitimate trade — profession and not a game of chance. The GoM is scheduled to meet tomorrow to reconsider the issues raised by Goa on the valuation aspects.

“It would make it unviable for the vast majority of players (consumers), negatively impacting net GST collection from the sector,” it said in a statement. In addition, if 28 per cent GST is imposed on the contest entry fee, the incidence of GST shoots up nearly 10 times (1,100 per cent).

“Thus, it is very likely that the industry and GST revenue, thereof, will cease to exist,” said the association.

Online games have paid a cumulative Rs 6,000 crore GST over the last four years and are likely to pay Rs 16,000 crore between 2022-2025. Ever since the implementation of GST, there has been a lacuna on the applicability of GST to various skill and chance games. Sometimes the discussion is about the valuation, sometimes the issue is about the slabs. This July it will be five years since the GST tax reform is implemented.

It is estimated that a major portion of this comes from online games of skill, given the transparent, measurable, and non-cash mechanism that this sector follows.

According to the IAMAI, the impact of any changes in the current incidence of GST would mean that many of the offline service providers will go underground leading to further revenue leakages on one hand.

“On the other hand, for the online games of skill, it would tantamount to killing the proverbial goose that lays golden eggs,” it said. Globally, many jurisdictions in the EU, the UK, the US etc. levy tax only on the GGR.

Studies show that a tax rate on the GGR between 15-20 per cent provides the most favourable returns to the tax authorities.

The industry body also warned that an increase in GST will prompt many offline service providers to go underground and lead to revenue leakage. Experiences outside India state that high taxation often led to decreased revenues.

The Supreme Court and the High Court in numerous decisions have ruled that games of skills are legitimate trades and, therefore, are protected under Articles 19(1)(g) and 14 of the constitution.

“It would be against the letter and spirit of the Supreme Court’s judgement to equate games of skill with games of chance — gambling, betting or wagering,” said the industry body.