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How The 28% GST On Online Gaming Will Influence The Development Of The Gaming Market In India The 28% GST on online gaming is a tax rate that will apply to the entire amount collected from the players who participate in online gaming activities, such as rummy, poker, fantasy sports, esports, etc.

By Robert Rebeiro

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Photo by Sean Do on Unsplash

Imagine Rajesh-he is an avid online gamer who loves to play rummy, poker, and fantasy sports on his smartphone. He enjoys the thrill of competing with other players and winning real money. He spends about Rs. 5000 per month on online gaming platforms, out of which he earns about Rs. 8000 as winnings. He pays a platform fee of 10% on his entry amount and an 18% GST on that fee. He also pays a 30% TDS on his winnings above Rs. 10,000. He is happy with his hobby and considers it a source of entertainment and income.

However, Rajesh's happiness may soon turn into frustration and disappointment. The GST Council, the apex body that decides on GST rates and rules, has recently announced that it will impose a 28% GST on the full face value of bets placed in online gaming, casinos, and horse racing. This means that Rajesh will have to pay a 28% GST on his entire entry amount, irrespective of whether he wins or loses. He will also have to pay the platform fee and the TDS as before. This will significantly increase his cost of online gaming and reduce his net returns.

Rajesh is not alone in this predicament. Millions of people playing online casinos in India are facing the same situation after the GST Council's decision. The decision has sparked a lot of criticism and controversy from the online gaming industry, which claims that it will kill the booming sector and harm the end users. In this article, we will explore how the 28% GST on online gaming will influence the development of the gaming market in India.

What is The 28% GST on Online Gaming?

The 28% GST on online gaming is a tax rate that will apply to the entire amount collected from the players who participate in online gaming activities, such as rummy, poker, fantasy sports, esports, etc. The tax rate will be uniform for all types of online gaming, whether they are games of skill or games of chance. The tax rate will also apply to casinos and horse racing.

The GST Council decided to levy this tax rate after considering the recommendations of a Group of Ministers (GoM) on taxation of online gaming, casinos, and horse racing. The GoM was constituted in December 2022 to examine the issues faced by the sector and suggest suitable measures. The GoM submitted its final report in August 2023, which proposed to amend the GST law to include online gaming and horse racing in Schedule III to be taxed as actionable claims.

The GST Council approved the proposal and decided to implement it from October 1, 2023. The Council also decided to amend the IGST Act to provide for liability to pay GST on suppliers located outside India who supply online gaming services to any person in India. These foreign suppliers will have to register in India and follow a separate procedure for compliance.

How Will The 28% GST Change Online Gaming in India?

The 28% GST on online gaming will have a significant impact on the online gaming industry and its stakeholders in India. For one, the cost of online gaming will increase for the end users: As mentioned earlier, the end users will have to pay a 28% GST on their entire entry amount, regardless of whether they win or lose. This will increase their effective tax burden by more than three times compared to the current scenario.

The profitability and sustainability of online gaming platforms will also decline. The online gaming platforms will also suffer from the high tax rate as they will have to bear the compliance cost and pass on the tax burden to their customers. This will reduce their margins and cash flows and affect their ability to invest in research and development, technology upgradation, marketing, and customer service.

Conclusion

The 28% GST on online gaming is a tax rate that will apply to the entire amount collected from the players who participate in online gaming activities, such as rummy, poker, fantasy sports, esports, etc. The tax rate will also apply to casinos and horse racing. The tax rate will be uniform for all types of online gaming, whether they are games of skill or games of chance.

The 28% GST on online gaming will influence the development of the gaming market in India negatively. It will discourage the participation and engagement of online gamers, drive away legitimate and licensed online gaming platforms, create a vacuum for illegal and unregulated operators, and affect the contribution of the online gaming industry to the economy. The GST Council should reconsider its decision and adopt a more rational and reasonable tax regime for online gaming that is in line with global standards and best practices.

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