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Going in for the Kill: Indian Online Gaming Industry Hit With 28% GST The move, which has come few months after MeitY announced new rules for online gaming, has resulted in a sense of fear among several gaming companies in the country,

By Paromita Gupta

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On Tuesday, the Group of Ministers (GoM) met for the 50th GST Council Meeting and decided to levy a tax of 28 per cent on three categories, including online gaming. "Online gaming, horse racing and casinos will be taxed. They each will be taxed at 28 per cent, and they will be taxed on full face value," shared Nirmala Sitharaman, Finance Minister.

She further added that online gaming had been a critical point of discussion for the GoM and was headed by Conrad Kongkal Sangm, Chief Minister of Meghalaya. The Indian gaming market is expected to touch USD 5 billion at a CAGR of 28-30 per cent and is expected to harbour a gaming population of 500 million by 2025.

The move has resulted in a sense of fear among several gaming companies in the country. "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. A tax burden where taxes exceed revenues will not only make the online gaming industry unviable but also boost black-market operators at the expense of legitimate tax-paying players, further undermining the industry's image and capacity to survive. It is in addition to the loss of employment opportunities and the huge impact on marquee investors who are heavily invested in this sunrise sector," shares Malay Kumar Shukla, Secretary, E-Gaming Federation.

"The discussion also looked at what is skill-based and what is chance-based. Whatever be the decision of each game being either skill or chance based, or being both or neither, is not what we are looking at. We are purely looking at that which is being taxed because it creates value, profit is being made, or a wager is being levied. Based on the wager, people earn, which is what betting is all about. Therefore, today's decision looks at that aspect of what is to be taxed and at what rate," added the FM.

This comes a few months after MeitY announced new rules for online gaming. "This is an enabling framework to allow the serious and significant expansion in the online gaming space in India, which is a very big opportunity," said Rajeev Chandrasekhar, Minister of State for Electronics and IT. Real money games involving wagering or betting were prohibited under the rule.

Roland Landers, CEO of The All India Gaming Federation, shares a concern towards loss of jobs and rise in illegal methods, "This decision will wipe out the entire Indian gaming industry and lead to lakhs of job losses and the only people benefitting from this will be anti-national illegal offshore platforms."

For Akshay Khandelwal, founder, Bowled.io, the decision is not an unexpected one, "If you consider the macro outlook, India is the youngest nation in the world (600M+ population <25 YO) with more than 300M active gamers. The gaming industry in India was expected to grow at 22.65% CAGR from 2022-2027. On a global scale, in 2022, the revenue generated by the gaming industry (170 billion USD) was bigger than the revenue generated by the movie industry and music industry combined (73.9 billion). With this kind of opportunity and moment, India has a real shot at becoming the "gaming factory of the world."

Former-cofounder of Bharatpe, Ashneer Grover, earlier this year launched a fantasy gaming platform "Crickpe". "It was good fun being part of the fantasy gaming industry - which stands murdered now. $10 Bn down the drain in this monsoon," Grover tweeted on the announcement.

Aaditya Shah, COO, IndiaPlay also echoes the frenzy in the industry and feels that the council should not treat skill-based games and casinos/betting apps the same way, "This higher tax burden will impact companies' cash flows, limiting their ability to invest in innovation, research, and business expansion. A levy of an 18% tax rate would have been helpful for the gaming industry. Introducing a 28% tax rate not only hampers online gaming platforms' capacity to develop new games and technologies but also undermines their competitiveness in the market."

From auditing and law perspective, the chaos is genuine. "Ignoring the long-time demand of the gaming industry, levying a 28% tax rate on the gaming industry will be a big setback for the Indian players. We will need to see the fine print of notification if any exceptions are created. We might immediately see notices being issued to the gaming players for differential tax and with this new series of litigation," said Ankur Gupta, Practice Leader (Indirect Tax), SW India. L.Badri Narayanan, executive partner, Lakshmikumaran & Sridharan Attorneys shared "The differential treatment for games of chance like casino and games of skill played in online gaming is arbitrary and will face legal challenges."

Roma Priya, founder, Burgeon Law feels that the decision taken by council is hampering the progress of the digital gaming ecosystem, "A balanced taxation framework, in line with global standards, is necessary to ensure the continued growth, innovation and competitiveness of the Indian gaming industry."

Paromita Gupta

Entrepreneur Staff

Features Writer with Entrepreneur India

Covering news and trends in AI and Metaverse segments. An avid book reader running her personal blog on the side. You may reach me at paromita@entrepreneurindia.com. 
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