Shillong, August 3: During the 51st GST Council meeting, the decision to tax online gaming at 28% on the gross value collected has faced criticism from industry players. They argue that taxing GST on deposits, rather than the technology platform commission charged by companies, will render the unit economics unviable, leading to an 80% wipeout of the industry.
As per IANS, most of the adverse effects are expected to be concentrated on MSMEs and startups that house new-age business models. Industry experts fear that the increase of 400% in taxes will encourage monopolistic play and hinder the growth of legal gaming platforms, potentially driving consumers towards illegal offshore products.
The Federation of Indian Fantasy Sports and E-Gaming Federation issued a joint statement, expressing concern that the new tax framework will burden the Indian online gaming industry with a 350% increase in GST, setting it back by several years. However, they hope that the decision will give gaming companies an opportunity to innovate and rebuild the foundation of gaming in India.
The GST Council has agreed to review the tax rate and valuation decisions after six months of implementing the amendments, offering some hope to the industry. It has also clarified that GST will apply to the entire sum collected upfront, while the proceeds from winnings won’t be taxed, resolving previous confusion on the matter.
Moreover, offshore online gaming companies will be required to register and comply with Indian tax regulations, with non-compliance potentially leading to site blocking. According to experts, the value of supply for online gaming and casinos will be based on the amount paid or deposited with the supplier by or on behalf of the player, excluding the amount entered into games and not on the total value of each bet placed.