Finance Minister Announces Review of Tax Rates on Casinos and Online Gaming after 6 Months in GST Council Meeting.
Finance Minister Nirmala Sitharaman chairs a GST Council meeting to discuss the 28% tax levy on online gaming, casinos, and horse racing. The council agrees to review the tax rate after six months of implementation. Find out industry experts’ reactions and the impact on the online gaming sector.
In a significant development for the gaming and entertainment industry, the Goods and Services Tax (GST) Council, chaired by Finance Minister Nirmala Sitharaman, convened via videoconferencing on August 2. The council discussed various aspects of the 28 percent tax levy on online gaming, casinos, and horse racing, which has been a topic of debate and concern in recent times.
During the meeting, it was announced that the amendments to the GST law, required to change the tax rates, will be taken up in the current Parliament session. The implementation of the revised tax structure is likely to begin from October 1, 2023. Additionally, the council has agreed to review the 28 percent levy on online gaming and casinos after six months of implementation, providing a chance to assess its impact.
Industry experts and representatives from the gaming sector have expressed their views on the proposed tax framework. Notably, Mr. Saumya Singh Rathore, co-founder of WinZO, an online gaming platform, voiced concerns over the new taxation approach. Rathore argued that taxing GST on deposits instead of the technology platform commission charged by companies could make the unit economics unviable, adversely affecting 80 percent of the industry. This, in turn, could lead to a concentration of fatalities among Micro, Small, and Medium Enterprises (MSMEs) and startups.
Echoing this sentiment, Mr. Abhishek Malhotra, Managing Partner at TMT Law Practice, stated that the decision of the GST Council may have a significant negative impact on the online gaming industry. He highlighted the uncertainty surrounding the likelihood of a rollback after six months and the potential constitutional challenges.
While concerns were raised about shifting bases outside India to evade the levy, Mr. Saket Patawari, Executive Director at Nexdigm, asserted that offshore gaming companies operating without paying tax would still be monitored through a new monitoring cell under the Directorate General of GST Intelligence (DGGI).
Despite the concerns, the government clarified that taxing online gaming will not legalize it in states where it is banned. Revenue Secretary Sanjay Malhotra emphasized that betting and gambling are already liable to GST, and taxing online gaming does not change their legal status.
The Federation of Indian Fantasy Sports and E-Gaming Federation (FIFS & EGF) lauded the government for addressing concerns related to repeat taxation. However, they expressed apprehensions about the proposed 350 percent increase in GST, stating that it may set the Indian online gaming industry back several years. The Federation also highlighted that established skill gaming companies might manage the changes, but smaller startups could face challenges.
In conclusion, the GST Council’s decision to review the 28 percent tax on online gaming, casinos, and horse racing after six months of implementation has sparked discussions and concerns within the gaming industry. The new tax framework is set to impact various players and may have far-reaching consequences for the online gaming ecosystem. As the industry adapts to the revised tax structure, it remains to be seen how it will navigate the challenges and explore avenues for growth and innovation.
Sources By Agencies
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