A Group of 127 online gaming players, including industry federations, has called on the government to reconsider the GST Council’s proposal to impose a 28% tax on the total amount of money wagered to online gaming platforms. They argue that such a decision could have devastating consequences for micro, small, and medium enterprises (MSMEs) and startups, including business closures.
In a letter addressed to the finance minister and the prime minister, the group expressed concern that the GST Council’s recommendation equates online skill gaming, a constitutionally protected activity, with betting and gambling, causing significant distress within the industry.
The representatives stated that implementing GST on the entire deposit value would hinder the industry’s growth trajectory. They further contended that this decision would incentivize illegal offshore gambling operators, leading Indian users to turn to these platforms, resulting in suboptimal tax collection and impeding the legitimate industry’s growth.
Prominent gaming companies such as Nazara Technologies, Third Unicorn (CrickPe), Winzo, Baazi Games, Dangal Games, Deltatech Gaming (Adda 52), Gamepe Technologies (Tamasha Games), Gameskraft Technologies, MyTeam11 Fantasy Sports (MyTeam11), and industry groups including the All India Gaming Federation, E-Gaming Federation, Federation of Indian Fantasy Sports, and All India Game Developer’s Forum were among the 127 signatories of the letter.
On Tuesday, the Ministry of Finance announced its decision to impose a 28% GST on online gaming, horse trading, and casinos, eliciting strong reactions from industry players. Specifically addressing online gaming, the authorities stated that the tax would be levied on the total value, irrespective of whether the games are skill-based or chance-based.
The companies’ letter outlined eight core points to support their argument, highlighting the impact on customer affordability, potential job losses, and the stifling of foreign investment and global competitiveness. They emphasized that the industry employs approximately 100,000 people across various roles, such as engineering, marketing, design, and research. They support thousands of content creators and game streamers in Tier II-V cities.
The letter, signed by the ‘Proud Entrepreneurs of Bharat,’ stated, “The industry’s growth projections envisage more than 500,000 new jobs over the next five years. Any negative impact on the industry will lead to companies reducing their expenditures, a significant portion of which is dedicated to employing the Indian youth, resulting in substantial job losses.”
Furthermore, the companies argued that the proposed move would increase costs for users who already have to pay a 30% income tax on their winnings. Unable to bear the additional burden, users might be compelled to turn to black market operators.
The companies have requested the ministry to discuss this issue at the earliest opportunity and provide any additional information required.
Call for Taxation Based on Revenue in Online Gaming Industry
Regarding the tax structure, the industry currently pays 18% GST on the gross gaming revenue or platform fee. The companies assert that increasing this to 28% would result in a 55% increase in the GST amount. To ensure the sector’s survival, the players propose a levy on the platform fee or gross gaming revenue the industry earns.
They argued that this approach is consistent with other technology service platforms, where only the media’s revenue is considered for GST imposition. The industry stands united in its request for a viable and progressive GST regime, appealing for a reconsideration of the current recommendation.
Additionally, the industry players noted that the proposed tax could lead to long-term net revenue loss for the government.
The letter expressed hope that the request would be positively considered to protect India’s nascent and high-growth-potential online skill gaming industry.