Online Gaming Industry favours 28% GST on gross gaming revenue, not on entry amount

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The government’s decision to increase the GST on online gaming from 18% to 28% is acceptable to the online skill-based gaming industry, but people in the sector argue that it should only be applied to gross gaming revenue (GGR) rather than contest entry fees (CEF) to avoid harming the USD 2.2 billion markets.

According to sources, the forthcoming GST Council may decide to change the current 18% GST on GGR to a 28% GST on the entire sum.

GGR is the amount that an online skill gaming platform charges as a service fee to assist players’ participation in a game on that platform, whereas CEF is the full sum that a player deposits to enter a contest on that platform.

Co-chief executive officer of Games24x7, Trivikraman Thampy said, “As an industry, we are united on our task that GST continues to be levied on the gross gaming revenue and not on the contest entry amount. The increase from 18 per cent to 28 per cent GST on the gross gaming revenue already increases tax revenue for the exchequer by around 55 per cent.”

While the industry can absorb this, he added that taxing contest entry fees will render the sector completely unprofitable. The increased tax burden will have to be passed on to consumers, which will have a knock-on effect as players switch to gray market and offshore gaming platforms that have no tax obligations in India.

The GST Council is scheduled to meet virtually on December 17, 2022, and the Finance Minister-led panel may discuss issues relating to the casino, racetrack, and online gaming industries.

According to Digital Works Pvt Ltd, the industry’s request for GST on gross gaming revenue rather than entry fees is critical to assuring the growth and development of this emerging sector in India.

Senior Director of Public Policy and Corporate Affairs at Head Digital Works, Sumanta Dey, said, “Applying GST on entry fees would severely disincentive players, who already pay a range of taxes and fees. In contrast, taxing gross gaming revenue, which is the global norm, would ensure that all players, regardless of their level of skill or success, are contributing to taxes fairly and equitably.”

He claimed that a high tax incidence on businesses or players may unintentionally push players to illegal, offshore gambling apps that don’t adhere to local regulations and don’t boost the economy.