The 28% GST on gross gaming revenue is acceptable for the online gaming sector, but not on entry fees.

by Mapping Returns

The government’s decision to increase the GST on online gaming from 18% to 28% is acceptable to the online skill-based gaming industry, but players in the sector argue that it should only be applied to gross gaming revenue (GGR) rather than contest entry fees to avoid harming the USD 2.2 billion market. According to reports, the upcoming GST Council may decide to increase the Goods and Services Tax (GST) from the standard 18% on GGR to 28% on the total amount.

The Contest Entry Amount (CEA) is the full amount deposited by the player to enter a contest on the platform, whereas GGR is the fee charged by an online skill gaming platform as service charges to facilitate players’ participation in a game on their platform.

“As a sector, we are unanimous in our request that GST continue to be assessed on gross gaming revenue rather than the cost of contest entries. The increase in the GST rate from 18 to 28 percent on gross gaming revenue already results in an increase in tax revenue of about 55 percent for the exchequer “Trivikraman Thampy, the co-chief executive officer of Games24x7, said.

While the industry will be able to absorb this, he added, taxing contest entry fees will render the sector completely unprofitable. The increased tax burden will have to be passed on to consumers, which will have a knock-on effect as players switch to grey market and offshore gaming platforms that have no tax obligations in India.

For the government, customers, the legal businesses in the industry, as well as any current or potential investments that the sector attracts, this is a lose-lose situation, he continued.

On December 17, 2022, the GST Council is anticipated to convene virtually. The Finance Minister-led panel may discuss topics pertaining to the casino, racetrack, and online gaming industries.

It should be noted that the Group of Ministers on Casino, Race Course, and Online Gaming was instructed to review the concerns in its terms of reference based on new information from States and provide a report as soon as possible by the 47th GST Council meeting, which was held in June.

The industry’s request for GST on gross gaming revenue rather than entry fees, according to another player in the market, Digital Works Pvt Ltd, is a critical step towards assuring the growth and development of this emerging sector in India.

“Since players already pay a variety of taxes and fees, adding GST to entry fees would severely disincentivize them. Contrarily, taxing gross gaming revenue, which is the norm around the world, would guarantee that all players, regardless of their level of success or skill, are paying taxes in a fair and equitable manner “Sumanta Dey, Senior Director, Corporate Affairs and Public Policy, Head Digital Works, said.

A high tax incidence on businesses or players, he claimed, may have the unintended consequence of pushing players to illegal, offshore gambling apps that don’t adhere to local regulations and don’t boost the economy. This is in addition to having a negative impact on the sector’s contribution to GST.

Online skill games include chess, rummy, poker, and fantasy sports. These games either have no entry fees or do but platform fees cost real money. DP CS MR PTI

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