Government Imposes 28% GST on Online Gaming, Prompting Disruption in the Gaming Community

Government Imposes 28% GST on Online Gaming
Government Imposes 28% GST on Online Gaming, Prompting Disruption in the Gaming Community
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Thursday, 13 July 2023, Bengaluru, India

The GST Council announced its decision to impose a 28% GST on online gaming on Tuesday, which is being criticized as a severe blow to the prospects of India’s booming gaming sector. The GST Council, a group of ministers, issued an interim report on which the decision was made.

A 28% Tax on the entire sum, including the platform charge, was suggested in the research. This implies that either the whole prize pool or the gross revenue will be subject to Tax.

The All India Gaming Federation, India’s oldest gaming organization, feels the ruling was “unconstitutional, unreasonable, and outrageous,” according to Roland Landers, Head of the organization. He commented that the judgment conflates online skill games with gambling operations, disregarding more than 60 years of established legal precedent.

“It is very unfortunate that when the Central Government has been supporting the industry – in terms of online gaming rules, clarity on TDS, etc., that such a legally untenable decision has been taken, ignoring the views of most GoM states who studied this matter in detail,” said Landers speaking about the recent events regarding the online gaming space. 

One of India’s emerging industries, gaming employs a sizable number of young people, IT experts, and creative workers, from streamers and engineers to professional e-athletes. The gaming industry in India is expected to increase from Rs 20,800 Cr in the fiscal year 2022 to Rs 68,800 Cr in the fiscal year 2027, with a compound annual growth rate (CAGR) of 27%, according to the newly released e4m- GroupM ESP Online Gaming Report 2023.

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The number of mobile gamers in India is expected to reach 650 million by 2025, with a population of players that now surpasses 500 million. The gaming industry has experienced tremendous churn even as it has grown explosively, from the banning of extremely popular (and lucrative) Chinese-owned games like PUBG to state governments arbitrarily placing restrictions, and even outright bans, on games and gaming to control “gambling addictions.”

“This is an extremely unfortunate decision as charging a 28% tax on full face value will lead to a nearly 1000% increase in taxation and prove catastrophic for the industry,” said Malay Kumar Shukla, secretary of the E-Gaming Federation, whose member companies include Games 24×7, Junglee Games, and Head Digital Works.

The online gaming sector will become unprofitable if taxes are too high and black market operators are given an advantage over gamers who pay taxes legally, further damaging the industry’s reputation and ability to exist.

While the sector was initially extremely upbeat about the new developments, including changes to the IT regulations and the adoption of TDS on net wins, experts warn all of this would be for naught if the sector is not backed by a progressive GST system.

Source- Exchange4media

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