Indian Finance Minister Nirmala Sitharaman deferred a proposal to levy 28 per cent GST on casinos, online gaming, horse racing and lotteries. The Group of Ministers (GoM), chaired by Meghalaya Chief Minister Conrad Sangma, has been asked to reconsider the tax rate on horse racing, online gaming and casinos by July 15. As of now, 18 per cent GST is levied on these. Ways, called Gross Gaming Revenue (GGR). Experts believe that the proposed 28 per cent GST on entry fee/deposit is going to adversely affect the gaming industry. The new recommendation, he believes, is contrary to global best practices, and will effectively increase the tax that companies pay by 1000 to 1500 percent. And that’s a concern for gaming companies.
“This would require companies to pay taxes on money they do not earn. In other words, it exceeds the margins of the companies. This will likely shut down the industry with immediate effect as well as bring the valuation down to zero. Further, taxing skill games at par with chance games, and under the gambling entry in the Constitution, is contrary to several court decisions on this point,” Dibyjyoti Mainak, SVP, Legal & Policy, MPL, told BGR.in.
The GOM recommends that online gaming be taxed at 28 percent of the full value, including the competition entry fee paid by the player upon participation in the game. The new tax will put a tax burden on players and ultimately reduce the prize pool. This will shift users to gaming platforms in other countries. Some experts say this may lead many online gamers to abandon betting platforms such as fantasy sports, rummy and poker. This may force Indian online gaming companies to move abroad.
“The market is operating in a manner where there exists a clear distinction between games of chance or gambling on the one hand and online gaming and all other forms of sports on the other. The nature of these two forms of services, their consumer demographics and an appreciable The fundamental difference is in their long term contribution in building the nation state.Painting the entire online gaming industry with the same brush as gambling by placing it in a single tax slab of 28% from the current 18% which has a serious impact on the growth of the sector will be deployed,” a WinZO spokesperson said. WinZO is a mobile e-sports social gaming platform. The platform offers around 70+ games including Carrom, Cricket, Bubble Shooter, Fruit Samurai, Knife Up, Memory Mania, Fantasy League and Trivia-based questions.
According to KPMG, online gaming is an emerging sector in India and has shown strong growth owing to the increase in wireless internet users and smartphone base. Data usage per telecom subscriber has increased from ~0.4 GB per month in 2015 to ~10.4 GB per month in 2019, with corresponding decline in data cost over the same period.
In addition, widespread adoption of digital payment mechanisms such as Unified Payments Interface (UPI) (the value of UPI transactions increased from Rs 2 trillion in January 20 to Rs 4 trillion on January 21) has also been a major growth driver for online gaming. . Real money gaming, including the card-based games and online fantasy sports segments, has seen strong traction in recent years, driven by high affinity for Indian users to pay for games if there is a monetary incentive involved.
“For an industry like online gaming, which is still in its early stages of growth and recognition, leaving high tax slabs will hinder growth and serve as a hindrance to growing companies, developers, creators and gaming organizations alike. Higher tax slabs may come after a few years once the industry reaches a platform similar to the larger entertainment sectors in India,” said Rohit Agarwal, Founder & Director, Alpha Zegus, Next Generation Marketing specializing in the domain of gaming Agency. and lifestyle, concluded.
The hike in GST on online gaming from 18% to 28% will have a negative impact on the industry, say experts, first appeared on BGR India.