Online gaming firms write to CBIC through FICCI Gaming Committee not to increase GST rate to 28%

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Online gaming firms have approached the Central Board of Indirect Taxes & Customs (CBIC) through the FICCI Gaming Committee, urging them not to increase the GST rate on online games from 18% to 28% as recommended in the Group of Ministers (GoM) report.

The FICCI Gaming Committee comprises Dream11, Zupee, MPL, Games24x7, Nazara Technologies, Winzo, Krafton, MyTeam11, HDworks and others as members.

The online gaming industry believes that changing the tax rate to 28% on the contest entry amount (CEA) as suggested by the GoM in its report, which was submitted during the 47th GST Council meeting in May last year, will severely impact the online gaming industry.

According to The Economic Times, the latest letter sent to CBIC states, “online gaming industry needs to be treated at par with information technology service providers. As per the current practices followed by the online skill-based gaming companies, tax is paid at 18% on the platform fees (GGR) charged from players.”

Online gaming firms and think tanks believe that the higher tax rate – that too on the CEA – will make the survival of the firms much more difficult, especially for startups in the industry. Instead, they believe that the tax rate should be levied on the Gross Gaming Revenue (GGR).

“The approval from the government recognised Self-Regulatory Body will clearly segregate permissible online real money games from gambling, betting, wagering,” said Joy Bhattacharjya, Director General of Federation of Indian Fantasy Sports (FIFS).

Bhattacharjya further said that these online games have been ruled as games of skill in multiple court judgments, setting them apart from games of chance. In this case, the games approved under the new online gaming rules should be taxed on GGR and not on CEA.

Online gaming firms have reiterated that the games provided on their platforms are games of skill and should be treated apart from games of chance. The gaming industry had also approached the CBDT and PMO in March this year regarding this matter.

Meanwhile, CBIC chairman Vivek Johri has already stated that any online game where winning depends on a certain outcome will attract 28% GST on the total bet amount. The final decision regarding the GST rate on online gaming is expected to be taken in the upcoming GST Council meeting later this month.