With allegedly different opinions on how the online real money gaming sector should be taxed, the Finance Ministry and the Ministry of Electronics and Information Technology (MeitY) have held meetings to evaluate the ramifications on the industry.
The GST Council has decided not to differentiate between online chance-based and skill-based games and tax them at 28% on full face value, while MeitY believes the matter can be reconsidered as per its online gaming rules released in April this year.
“There has been a sense that GST on full face value could impact smaller startups in the online gaming sector… it is not the intention of the government to hurt the sector. That is the thought process with which a review will be sought, once the new framework (of online gaming rules) is up and running,” a MeitY official said as quoted by The Economic Times.
Another official stated that there is also a difference of opinion between MeitY and the states. “There were statements that deliberations around the GST Council’s decision for online gaming were on moral and ethical grounds,” the official said.
However, on the other hand, MoS MeitY Rajeev Chandrasekhar has denied there is any difference of views between his ministry and the Finance Ministry, in a Tweet today.
“As regulatory framework for permissible online gaming stabilizes we will rqst (request) GST Council to study n (and) consider new Framework,” Chandrasekhar said, further adding, “Both FinMin n MeiTy are working together in Whole of Govt approach to challenges n opportunities in Digital space.”
In between all the deliberations, the online real money gaming industry is eagerly waiting for clarity and a possible review of the Council’s decision. Almost all the online gaming companies believe that the new tax policy will kill startups and result in slower growth of the sector.
Around 130 gaming companies and industry bodies recently came together to seek a meeting with government officials, asking for a reconsideration of the decision. They enumerated all the adverse effects of the decision – job losses, shutdown of businesses (especially emerging startups) and switchover of users to illegal betting websites.
The companies believe that the tax should be levied on gross gaming revenue (GGR). However, if the decision remains the same, they would be accepting it. Nevertheless, they do appreciate MeitY’s intention to ask for a reconsideration.
A gaming company official said, “The signals from MeitY are a positive, though. If the tax is applicable repeatedly on every bet placed even when played using winnings, it could severely discourage users.”