The Indian online gaming industry, valued at $3.5 billion, has called on the government to reconsider the 28 percent Goods and Services Tax (GST) on Contest Entry Amounts (CEA) to support domestic companies and foster growth in the sector, reported the Business Standard.
The Skill Online Games Institute (SOGI) claims that the high tax rate is limiting local businesses and inadvertently supporting illegal offshore betting and gambling operations. “The shift from 18 percent on gross gaming revenue to CEA in October has become a financial burden on legitimate domestic platforms while unintentionally boosting illegal offshore activities,” said Amrit Kiran Singh, Founder and President of SOGI.
He added, “The government had agreed to review the GST rates on online gaming. Finance Minister Nirmala Sitharaman had assured us of a GST rate review after the elections. I am urging that don’t do the review before you have full information on the industry in India and worldwide”.
Singh emphasized the need to reassess the GST policy to curb illegal gambling and support the growth of the domestic online gaming industry. He expressed concerns that the high tax rate is challenging Indian companies, while foreign companies, particularly those from China, benefit from a competitive advantage due to the absence of such a tax.
“The government had agreed to review the GST rates on online gaming post-election, and we believe this should be done with a comprehensive study rather than focusing solely on the revenue increase from the tax shift,” Singh added. He said that every penny is taxed for every Rs. 100 earned by gaming companies. However, gaming companies hold 10% of the total revenue and the rest is distributed as prizes for which there is TDS as well.
Singh also requested the government to consider the taxation models of other countries like the US, the UK, and China. SOGI is collaborating with the University of Oxford to study global regulations and tax structures for online gaming.
SOGI highlights the industry’s potential for job creation and economic growth, noting that the sector currently employs over 200,000 people and has grown at a rate of 35 percent CAGR in the last five years. With the right regulatory framework, SOGI believes the industry can grow five to six times very soon.
To work on the technical and legal issues of online gaming SOGI tied up with many IITs, IIMs and NUJS (Kolkata). Singh who was in Kolkata said to the Times of India, that the three main charges marked against the online gaming industry were addiction, skill vs chances and PMLA. “All these issues can be resolved through technical intervention. That is why we are working on it.”
The Hindu Business line stated that a SOGI report shows that West Bengal has spent 25 per cent more time on indoor entertainment than the national average over the last four years. As per the report, time spent on indoor entertainment shot up in January-April 2020 at 3.5 hours per day in the state. From January-April 2020 to September-December 2023 the sector witnessed a general decline, with a final figure of 1.8 hours per day.