The skill-based online gaming industry has argued in favor of keeping the service under the 18% GST slab instead of placing it in the highest tax rate category of 28%, saying that the move would hit the $2.2 billion sector hard.
The increase in taxation would not only have a catastrophic impact on the industry, but would also encourage offshore operators who circumvent Indian tax jurisdiction by hosting games in another country, Games24x7 co-CEO Trivikraman Thampy said.
“It would be a triple whammy – the industry loses, the government loses tax revenue and gamers lose because they would be exposed to unscrupulous operators,” he said.
An association of skill-based online gambling platforms has made representation to the authorities to keep the Goods and Services Tax (GST) at the current level for the industry which has 400 players employing around 45,000 people.
Online games of skill include electronic sports, fantasy games, rummy, poker or chess. These games are either free or involve real money in the form of platform fees.
The issue has gained traction as the GST Board, at its next meeting, may seek an increase in tariffs for casinos, racetracks and online gambling services to 28%, as suggested by a panel of state finance ministers. However, the agenda for the meeting has not yet been finalized.
A decision on whether the tax should be levied on the gross or net assessment would be made after further deliberations at official level.
Currently, casino, horse racing and online gaming services are subject to 18% GST.
The government had in May last year set up a group of ministers of state for better assessment of the services of casinos, online gambling portals and racetracks for the collection of GST.
The online gambling industry is directly linked to the growth of several other sectors such as semiconductors, banking, payment gateways, telecommunications, fintech, sports and entertainment.
According to Thampy, GST is currently charged on a platform fee, called gross gaming revenue (GGR), rather than the total pooled amount for a game.
“International best practice also highlights the optimal tax bracket for the online gambling industry at between 15 and 20%. Our current 18% GST rate is in line with best practice and reduces the incidence of illegitimate operators,” he said.
Online games of skill are inherently different from games of chance, and the skill game industry is not gambling or a lottery, he added.
(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)