GST scheme for online gaming concerns for industry experts about future growth

With the government’s proposal to tax online gaming at the highest rate under the Goods and Services Tax (GST), the sector is worried about the potential for expansion in the future.

It was reported that the proposal of the State Group of Finance Ministers to collect 28% GST on online gaming, casinos and horse racing is expected to be reviewed by the GST Council in its meeting to be held on June 28.

According to a recommendation made by the Group of Ministers led by Meghalaya Chief Minister Conrad Sangma, online gaming should be taxed on the full value of consideration including competition entry fees paid by the player for participating in the game.

However, officials and experts in the online gaming industry have expressed concern. According to him, this could slow down the expansion of online gaming companies and force fantasy sports companies to offer smaller prize pools, forcing their loyal customers to leave the platform in search of more and more games.

Kaushik Komandur, AVP, OnMobile Global Limited, one of the leading mobile entertainment companies, shared his opinion on the matter with News18.

According to him, the revenue of the online gaming industry is likely to increase manifold by the end of this year. Citing details available on Statista, he said that the market is currently worth $1.54 billion in 2022 and is expected to grow to $5 billion by 2025, creating 2 lakh additional jobs in the process and India has become one of the world’s leading gaming markets.

“Today unfortunately in India, every state has different rules and policies and this has become a hindrance in the growth of this high potential industry. Continuous uncertainty will dry up the FDI flow into the industry and this is something the government is not doing. wants,” the industry insider said.

Komandur said that the Prime Minister Narendra Modi It is strongly stated that “the gaming market is huge internationally and the number of youth associated with this market is increasing globally” and the Ministry of Electronics and Information technology Had a meeting with several online gaming platforms including some of the leading gaming unicorns to discuss the framework.

However, he added: “The current regime taxes online games at 18% GST. It is in line with international standards of 15-20%.”

But Komandur also highlighted that “the boom in revenue has drawn the attention of the government to GST taxation”.

“The government is now looking to impose 28% GST on the online gaming industry, as a step to regulate the sector, citing the example of horse racing. Any further increase from current levels will only burden players with paying GST and may encourage players to turn to more viable games hosted offsite,” he added, adding that “on all accounts By this move, gambling and betting within the country may be discouraged.”

Meanwhile, Dinkar Vashisht, Vice President of Corporate and Regulatory Affairs, Games24x7, told Mint that such an option (imposing GST on the aggregate pool instead of GGR) would not only be disastrous for the sector, but it also violates both the principles. Proper taxation and GST guidelines.

According to Vashisht, only lotteries, betting and gaming are considered “actionable claims” under the GST Act. Creditors can make an actionable claim on any type of debt other than one secured by mortgage of real estate.

In real money games, for example, money placed by players to form a prize pool which is then spread among the winners is an actionable claim.

Vashisht also added: “Only the platform fee charged by Kaushal gaming operators is the value of the supply.”

As reported, other industry experts are also concerned that a reduction in the prize pool could prompt many gamers to turn to offshore betting companies that offer fantasy sports, online rummy and poker.

Notably, the total number of online gamers grew by 8%, from 360 million in 2020 to 390 million in 2021, and India is projected to become one of the largest gaming marketplaces in the world.

According to a report by KPMG, it has been growing slowly for the past five years and is projected to triple to $3.9 billion by 2025.

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